Changing income tax rates is proving to be high on the agendas of most political parties, except for Labour, this election.
National wants the brackets adjusted for inflation, Act wants a flatter system, while the Greens, Te Pāti Māori and The Opportunities Party (TOP) want it to be more progressive.
What does this mean for you?
Everyone would receive an income tax cut under National’s proposal – although the reduction would be smaller for lower income earners, and cap out at a relatively low level for middle to higher income earners.
For example, someone who earned $40,000 would only get an extra $112 a year under National. Someone who earned $60,000 would get $800, and someone who earned $80,000-plus would receive an extra $1043.
Changes would be more drastic under proposals made by the smaller, more economically left-leaning parties.
Someone with an income of $60,000 would get a cut of $1220 under the Greens’ policy, a whopping $6520 under Te Pāti Māori, and $2020 under TOP.
At $80,000, the size of the tax cut would fall under Te Pāti Māori, but rise under the Greens and TOP to $1270 and $4320 respectively.
The size of the cut would come down thereafter for both parties. However, tax hikes would kick in much sooner under the Green Party’s policy, at the $125,000 mark, compared to TOP’s policy, at around $250,000.
Under the Green Party’s proposal, someone on $300,000 would pay an extra $10,330 a year – the most out of what any party is proposing.
While the hikes for high income earners proposed by the Green Party look significant, the tax reduction the party is proposing at the lower end of the income spectrum would affect many more people.
Turning to Act, it’s campaigning on making the income tax system flatter over a few years to avoid exacerbating inflation and adding more debt to the Government’s books.
Its cautious approach means the first iteration of changes proposed for 2024-25 are relatively minor compared to what some of the other smaller parties are campaigning on.
Someone on $40,000 would pay $980 more under Act. However the party would offset this with a tax credit for low and middle-income earners, and a carbon tax refund, claiming no one would pay more tax.
Those on around $60,000-plus would receive a tax cut under Act, which would cap out at $520 a year.
In 2025-26 and 2026-27, Act would like to continue flattening the income tax system, including by eventually removing the top tax rate of 39 per cent.
By this point, higher income earners would receive greater tax relief. For example, someone on $200,000 would pay $5020 less a year.
NZ First is likewise campaigning on delaying changes to the income tax system, saying it would make the lowest bracket tax-free “no later than April 1, 2027″, and would “adjust tax brackets for inflation starting April 1, 2024, with the first adjustment taking place in 2027 and every three years thereafter”.
Looking at the numbers a different way, someone on an income of $60,000 would see 18 per cent of their income go towards tax under Labour and Act, 17 per cent under National, and 16 per cent under the Greens.
Someone on $120,000 would see exactly a quarter of their income go towards tax under these four parties’ policies.
Of course, a party’s income tax plans need to be considered alongside their other policies.
Left-leaning parties – other than Labour – are campaigning on taxing wealth (or land in TOP’s case) for example, to recoup some of the costs associated with delivering some hefty income tax cuts.
National and Act want to reduce the tax burden on property investors.
Labour is focused on removing GST from fruit and vegetables and continuing to lift welfare payments.
National wants to limit welfare payment increases, to save $2 billion over four years, by indexing main benefits to consumer inflation rather than wage inflation.
See a summary of parties’ key tax policies below. All the costs and savings listed relate to the four-year forecast period from 2024-25. The two major parties’ plans have been summarised to a more detailed extent than the smaller parties’ plans.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
Prospect of rivers of fresh tax revenues shrank, on reflection, to mere trickles.