![]() The long overdue issue of tax bracket creep has now reached the point where it cannot continue to be ignored. “Coming into an election, with the economy and cost-of-living top of the political agenda, tax could well be a deciding factor in whoever wins the vote. The government spent $2.88 billion on finance costs last year, which nearly doubled to $5.67 billion in 2023, adding three more days to New Zealanders’ tax-paying year. This is especially pressing as the government is also seeing the value of every dollar it spends eroded by inflation. This makes efficiencies and getting the most for each taxpayer dollar more important than ever,” says Spencer. We know that more government spending drives inflation, but also that more Kiwis are reporting hardship or expressing concern about service delivery standards in key areas such as education and healthcare. “When you look at the major increase in Core Crown expenses, it’s vital to talk about the value that’s being delivered in these areas, getting the right balance on both tax and government spending. Meanwhile, while spending has increased across health, education and welfare, there have been growing calls for additional spending to address delivery challenges across all three. Welfare spending has increased off a pre-Covid base of $26.6 billion in 2020 to an estimated $39 billion for 2023. The Tax Freedom Day calculations also show that Core Crown expenses have risen from $80 billion in 2018 to an estimated $129 billion in 2023. The concern is that the 33% tax rate that was designed for the highest earners a decade ago is now capturing people across the board, something that’s even more urgent to address during a cost-of-living crisis.” "Remember that there is a 30% tax on every dollar earned by someone on just $48,000 of annual income, which is less than someone earning the living wage. “When you add the effects of bracket creep, where workers are pushed into a higher tax bracket by wage increases, more and more Kiwis are seeing their tax bills go up significantly," says Baker Tilly Staples Rodway Christchurch director Spencer Smith. Kiwis will spend 142 days paying tax, with the proportion of tax as a percentage of GDP increasing on last year. This year, Tax Freedom Day is forecast to arrive on May 22. The introduction of the top 39 per cent individual tax rate meant last year’s final date of May 20 marked the biggest shift in two decades, with the overall tax take increasing 15 per cent from the previous year. Tax Freedom Day marks the hypothetical day when New Zealanders have paid off their collective tax bill in full for the year, after which date every dollar they earn is tax-free. Inflation means Kiwis are now paying more tax while seeming to get less for their money. ![]() The GST figures say it all – GST has increased in line with inflation while the personal tax take has gone up 10.5%. Although the latest figures show a much smaller increase than in 2022, that is likely to come as small comfort for many struggling with the cost-of-living crisis. ![]()
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