National/ACT point-scoring demonstrates why Tax Working Group should put end to bracket creep

The Taxpayers’ Union says both National and ACT’s political point scoring and bickering over ‘bracket creep’ shows precisely why Sir Michael Cullen’s Tax Working Group should recommend to annual indexation of income tax thresholds.

Jordan Williams, the Taxpayers’ Union Executive Director, said in response to David Seymour’s media release earlier today:

“Bracket creep is the effect average wage growth and inflation have on people’s average tax rate. It pushes people into higher tax brackets without any increase in income, and allows right wing parties to offer ‘tax cuts’ that are imaginary. They generally only compensate for the hidden bracket creep tax increases over time.”

“While we welcome National’s Finance Spokesperson Amy Adams, and ACT’s David Seymour, highlighting the issue, the fact is that neither Party has walked-the-talk while in Government. In Canada, where income tax indexation is legislated, it was the centre-left liberals who did it twice, after the centre-right Conservative Party abolished the practise.”

“Sir Michael is the only Minister of Finance in living memory who actually tried to address bracket creep in 2005. The last National Government didn’t deliver, but nor did ACT when it had considerable sway in the Bolger/Shipley government in the 90s.”

“Let’s take the trickery and game playing out of the tax system by encouraging the Tax Working Group to fix this anomaly.”

More information about bracket creep (also called ‘fiscal drag’) – and details of the reforms in Canada – are available in the Taxpayers’ Union’s submission to the Tax Working Group (refer to paragraphs 38 to 56), available at https://www.taxpayers.org.nz/twg_submission.

ENDS

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