NEW REPORT: Inflation tax costs median Kiwi $480.14 a year

A Kiwi on the median salary is now paying an extra $480.14 a year in income tax because tax thresholds have failed to keep pace with inflation, a new Taxpayers’ Union briefing paper reveals.

The Inflation Tax finds that the annual cost of bracket creep has more than doubled in just nine months. If the thresholds introduced in July 2024 had been indexed to inflation, someone earning $73,788 would pay $13,876.76 in income tax rather than $14,356.90.

Taxpayers’ Union Policy Analyst Austin Ellingham-Banks said:

“Every year, inflation quietly pushes more income into higher tax brackets, increasing the Government’s tax take without Parliament ever voting for a tax rise. That is an inflation tax."

“National adjusted tax thresholds in 2024 but left the underlying problem untouched. Just two years later, bracket creep is already costing Kiwi's on the median wage $480.14 a year, and that bill will only keep growing."

“National is campaigning on a ‘No New Taxes’ pledge, while Labour has ruled out new taxes beyond its capital gains tax. If those commitments are worth anything, both parties should back automatic indexation so inflation can no longer increase New Zealanders’ tax burdens by stealth.”