Here’s some rare good news: The average household will save $30 per week starting Wednesday, thanks to the first income tax cut in almost 14 years.
The change to brackets will reduce the tax bill by 1.5% for minimum wage earners, 6.9% for median wage earners, 5.3% for average wage earners, and 4.4% for high wage earners.
Additional tax credits focus the total tax package on lower and median earners, especially those with children, who are the biggest beneficiaries of the changes.
Finance Minister Nicola Willis stated the average household would save about $30 per week, or $1560 annually, though the highest and lowest earners will get less.
This fulfils her key election promise to provide tax relief for New Zealand’s 'squeezed middle,' who have been absorbing small tax increases over the past 14 years.
A worker earning $70,000 in 2010, when tax brackets were last changed, paid an effective tax rate of 20%. Today, they would pay 24% if their salary had kept up with inflation.
Willis has legislated an 11.5% increase in the brackets, reducing our hypothetical worker’s effective tax rate to 22.5%, the rate they paid at the start of 2022.
This tax cut is intended to be the spoonful of sugar that makes the medicine go down; a bit of good news in a policy program otherwise dominated by cuts and “tough decisions”.
From an economic perspective, cutting taxes while the Crown is running a structural deficit defies logic — it simply isn’t the right thing to do.
However, Willis believes the public wouldn’t accept aggressive cost-cutting without some reward. She’s probably right.
But striking the right balance is challenging. Cutting taxes too much may prevent delivering a surplus, while not cutting enough might seem stingy to voters. Plus there are other promises to keep, such as funding cancer drugs and improving frontline services
Triple threat
National’s election pitch emphasised three key messages: cut wasteful spending, reduce taxes, and deliver better services. It must achieve all three.
It’s somewhat awkward that tax cuts come just after the Government announced cost-cutting in the health sector, which has restricted the very frontline it promised to bolster.
This is exactly the argument Labour has been trying to make: tax cuts aren’t worth the underfunding of core services they could cause.
Perhaps it’s unfair to lump the two together. Health NZ might be running inefficiently and need a management overhaul. But the timing is discordant.
The question for the Coalition is whether the tax cuts feel worth it? A Taxpayers’ Union poll in April showed a slim majority supporting lower taxes.
But support was polarised: over 70% of Coalition voters favoured lower taxes, compared to just one third of opposition voters. Overall, 53% supported and 29% opposed.
Front-liners
Perhaps those opposed want that money to go towards having fully staffed hospitals and more police fighting crime on the streets.
The Coalition increased core health funding by $1.4 billion in Budget 2024, which was what the pre-election fiscal update said would be needed to meet cost pressures.
However, Health NZ told Parliament that number had become outdated due to higher than expected inflation and population growth in the time since. Labour said this showed the Government had knowingly underfunded the health sector and had caused the budget blowout as an excuse to make further cuts.
This argument isn’t watertight, as Health NZ’s budget overrun began before the budget, and the Coalition increased funding more than either party’s fiscal plan. But it shows how tax cut money could’ve been spent on more nurses.
Health NZ’s chief executive, Margie Apa, said they hired too many nurses in the past six months, reducing the vacancy rate to 6% and causing the budget blowout.
Some voters might think reducing nursing shortages was the point of cutting wasteful spending in the first place. The tax cut money could cover Health NZ’s budget overrun twice.
Another example is the prolonged police pay negotiations, which the Government won through arbitration. The Police Association said arbitrators were swayed by the need to “adhere to the government's fiscal constraints”.
It implied uniformed officers might have been laid off if the higher pay offer was chosen — likely a bluff since the Coalition promised to hire 500 extra cops.
Whatever fiscal constraints exist, they could’ve been $3.7 billion less each year if the Government hadn’t cut taxes; more than the entire police budget.
That’s the trade-off. But ultimately, it’s not up to the Government; New Zealand voters chose to reduce taxes. The Coalition had a democratic obligation to deliver on that promise. The question is whether there will be any buyer’s remorse.
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54 Comments
This is exactly the argument Labour has been trying to make: tax cuts aren’t worth the underfunding of core services they could cause.
Spending is not the problem, spending and nothing to show for it is!.
you could spend money on the 14 layers of bureaucrats, or you could spending more on the front-line services.
The 14 levels of bureaucrats is a coalition lie and has been called out. It includes the patient and the frontline staff e.g nurse/doctor, the ward nurse, etc...
https://www.thepost.co.nz/politics/350356513/not-so-14-layers-managemen…
The 14 levels of bureaucrats is a coalition lie and has been called out. It includes the patient and the frontline staff e.g nurse/doctor, the ward nurse, etc...
https://www.thepost.co.nz/politics/350356513/not-so-14-layers-managemen…
Is not the preferred hierarchy not more than 7 or 8 between top management and the lowest echelon? I'd also be concerned with double ups between THBs and Health NZ.
For someone who has come from the Corporate world I'd expect better of him than accepting someone feeding this info to him without question.
As a choice between him and Hipkins/Labout party I'd still go with Luxon with the handbrake of course.
..what, only 12 layers ! how dare they cut essential management to the bone (sarc/)
- 1. Chair and Board
- 2. CE
- 3. Chief of Staff
- 4. National Director Hospital and Specialist Services
- 5. Regional Director Hospital and Specialist Services
- 6. Group Director Operations
- 7. General Manager
- 8. Service Manager
- 9. Manager
- 10. Assistant Manager
- 11. Team Leader
- 12. Team Supervisor
- 13. Team Member
- 14. Patient
"In response to some subsequent criticism that patients are not part of the system and shouldn't be on here, I would reject that. They are absolutely a key part of the system and they deserve their place," the spokesperson said.
A bit like the RBNZ (don't quote me on the order). Make sure you have a look at the list of 263 job titles, in particular the duplication of "Portfolio managers".
- Governor
- Deputy Governor
- AG/GM
- Director
- Senior Manager
- Manager
- Senior Adviser
- Senior
- Strategic Adviser
- Adviser
- Team Leader
- Misc (Receptionist, Scrum Master, Analyst etc)
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
I really don’t like these changes being called tax cuts. The percentage of a persons income that a person pays in tax has increased a lot especially for people on around $50-$70k. The minimum full time wage is $48k. The last time the rates were adjusted for this group is 2010. For context, the minimum wage was $26.5k. It seems cruel to take 30% of someone who is on the minimum wages pay if they get a modest pay rise. This is really reversing part of the tax increases that have been happening by stealth over the last 14 years.
Income Tax Brackets Australia: 2023-24
Taxable IncomeTax on this IncomeMarginal tax rate
$0–$18,200Nil0%
$18,201–$45,00019c for each $1 over $18,200 19%
$45,001–$120,000$5,092 plus 32.5c for each $1 over $45,000 32.50%
$120,001–$180,000$29,467 plus 37c for each $1 over $120,000 37%
vs NZ
Personal income tax rates
Taxable income (NZD*)Marginal rate (%)
0 - 14,0000-15,600 10.5%
14,001 - 48,00015,601-53,500 17.5%
48,001 - 70,00053,501-78,100 30%
70,001 - 180,00078,101 - 180,000 33%
180,001 and above180,001 and above 39%
You left out the 45% marginal tax rate for Oz income over $180k (6% lower than NZ's top rate for over $180k).
https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residen…
People would often leave out that little tidbit when they went on some tirade about "Taxcinda". I saw a comment once that someone's friend who's a doctor was "leaving to Australia" because of NZ's new punitive top marginal tax rate of 39%. I never received a response when I pointed out their top tax rate is 45% and they have a medicare levy.
A $250k income in NZ = $77k in tax vs Australia being $83k. Although the recent tax changes will have changed things.
- Tax bands for central government should rise proportionally to the rate of inflation each year. (better we keep and spend out extra money than govt)
- Tax rates for local services similarly should be pegged to inflation. (again we can choose how to spend out money better than them)
- Both should be obligated to deliver their services within that budget.
- KPIs for delivery of core services for both should be reported on annually. broken down by department and delivery of services vs kpis and maintenance of existing assets. so the public can see exactly whats happening and we arent spending on new stuff before maintaining existing stuff ... and we arent importing people we cant afford to provide services for.
It would put paid to the import of low skilled immigrants to prop up the economy in the short term, but that same issue that is slamming our economy in the long term.
Our domestic population increase is negative. so tax and rates should be falling in real terms - after accounting for inflation and if immigrants were paying fairly for the increase in demand on public service/infrastructuire.
I get sick of the "we know how to spend money better than the government" talking point.
With your after tax money, how many roads have you built lately? How many criminals have you caught and jailed? How many children have you educated? How many sick people have you healed?
Governments contribute to society in a way that nobody else does. For good reason.
Most people spend their surplus after tax on living expenses, and then pumping sharemarkets and house prices (what a great use of money!). Toys and hobbies. Eating fast food or dinners out. Drinking too much. Travel for fun. All good stuff in moderation, but in a different league to what the Government spending is there for.
For example, lets not suggest that everyone buying a home alarm and better locks is a better solution for security than funding a police/justice system.
Completely agree. And it's generally the same commentators that say the advantage of getting a big mortgaged house is that it forces people to save to pay off the mortgage. Maybe it's only good to force people to save money when the savings go to private businesses like banks.
And I get pretty sick of people saying the government knows how to spend my money better than I do.The point isn't "we know how to spend money better than the government".
The point is "I know how to spend my money better than the government".
Big difference.
Does the state do something useful every now and then? Of course, otherwise politicians wouldn't get re-elected. And they very much want to get re-elected.
The issue isn't giving the govt money. It's the wastage giving the govt more and more money produces.
Businesses have to operate efficiently and work out the ROI on new projects because they have limited income and for borrowing need to demonstrate a return or the lender.
If governments and local governments just take whatever money they like by increasing income.. where is their incentive to actually be efficient and choose the right projects. Which is why we read continually about wastage and projects are mismanaged
My opinion is not designed to cut the work of govts but to make the spend our money wisely.
It seems like you rewrote your post, making my reply seem strange and out of place. Great.
Of course, the government should spend wisely.
I think the government should be a set size of the economy, and taxes should be set to target that. Parties can argue what that level should be, and move it. Then voters can understand the changes the government is actually doing.
For example, National promised "no cuts to health and education" and they would argue that the budget has not gone down (in numbers of dollars spent). But in per capita inflation adjusted numbers the Health budget has been cut by 4.5%.
When asked what they have done for this sector or the other, every politician uses inflation and population growth to do the heavy lifting when they say they have 'invested' in the country. We should move to only talking in terms of inflation adjusted, per capita spending. Cut out all the bs.
Is your suggestion that government agencies should have their budgets on a boom/bust cycle so they don't get complacent? I am not sure what the benefit of that would be. I would not want to get sick during a 'bust'.
This is daft. How you can you compare the state's role building roads, policing and jailing people, educating people, and hospitalising people. For one, we have private schools and hospitals, and we could have a lot more PPP toll roads, so we can discount those. For another, the money from my tax xuts will probably go to fixing my broken oven, fixing my leaking roof, clothing and feeding my chidlren with better clothes and more nutrious food than we can currently afford. Morally, I think I am the better authority on how to improve the wellbeing of my little society (my family), especially when it's money that I earned through the sweat of my brow.
I feel a right swine saying this, but basically I'd argue the preference is to have robust public services, infrastructure etc and I'm happy to pay higher taxes for that BUT considering we seem incapable of delivering that no matter who is in charge and for how long (we can't even demonstrate tangible gains in terms of 'catching up' on past deficits in terms of services/infra - because both sides of the spectrum insist on inflating the population so the goalposts keep shifting) then I'd rather just vote for whomever is going to let me keep as much of my hard-earned as possible as at least this way I can be in a more luxurious position while polishing the brass on the Titanic, so to speak.
Disclosure: I voted for the current government (not enthusiastically) because I had no faith that even if the last government doubled taxes that there'd be any noticeable improvement to any service/infrastructure, ever. Not that I think the current government will do any better ... but my tax cut literally just paid for flights to Fiji next year and that's something tangible.
If some credible party comes along with a plan that isn't just "we promise you'll see service/infrastructure improvements after you vote for us next time, wink wink" then I'll reconsider my 'pull-the-ladder-up' ways which I still feel a bit dirty about (but at the same time we are clearly moving towards an increasingly low trust, every-man-for-himself society and unless we all wish to reverse that trend, I'll put mine and my family's needs first any day of the week).
The current government is specifically out to undermine peoples faith in government. Defund and deregulate it all. Oh, things have gotten worse now? See we told you government doesn't work, lets try it a different way by privatising. Thanks, I am off now to a cushy job with that private corporate who we sold the place to.
Don't fall into their trap.
UK Tories playbook 101.
Education, health, prisons, water, rail, energy, infrastructure builds, etc... more privatisation is always the solution.
Look to what has happened in the UK after 14 years of Tory rule to see where we end up under this coalition's policies.
If we include State housing as infrastructure then take a look at Labour in the UK and Labour here in the past. I wonder what is going to happen under Labour in the UK. I suppose one could be optimistic and say it can't be worse than the Tories. Will either ever learn.
Note UK Labour have not done any homework while in opposition, no different from Labout here , when they (UK Labour) promised 1.5m house in 5 years.
A comparison. UK 1.5mill houses in 5 years. 1,500,000/(365*5) ~ 800/day. Labour kiwibuild, NZ 100,000 in 10? years 10,000/yr = ~27 houses/day
population ratio 65/5 mill UK/NZ 13:1 so UK 800/d / 13 = 62 house/d equivalent to NZ
UK Labours housing headwind. Start at about 1m45s if you want to miss the first bit of ridiculing but overall its pretty good. https://www.youtube.com/watch?v=MTPkgenCV3o
Another one referencing UK housing and immigration. Start at 5m45s for the housing bit, otherwise also overall good.
https://www.youtube.com/watch?v=clbXZP7JM8g
Certain infrastructure not as easy to do as opening your mouth and blathering some unachievable numbers.
Personally, a one-off bracket adjustment is going to have zero effect on my life. I think it might just cover my monthly netflix subscription and a weekly coffee. If anything, we should have annual bracket adjustments (cos that actually would make more of a difference for people over the longer term). We fund on 'expected expenditure' rather than 'target expenditure' and I think the health example shows that. The real waste I would like to see cut is universal superannuation - it should be means tested. And for all those people who say 'I paid my taxes, I should be entitled to it', well, there comes a tipping point where is massively unsustainable and something has to change. I'm in my mid 30s, and me and my husband have been putting money away in our kiwisaver since it was introduced - because we know, there sure as hell isn't going to be universal superannuation by the time we are 65. It's bankrupting our country. To be honest, health is a black hole for expenditure, but once again, that is typically expenditure incurred in the final five years of a person's life. We should be pouring money into the first five years of a person's life. All of the spend is absolutely backwards, worst ROI you could imagine.
From a personal point of view, a removal or cut of the top tax bracket would benefit me to the tune of thousands of dollars annually. But i still believe a removal of WFF/IETC and replacing with a generous tax free threshold (as in Australia) is the best choice for society as a whole.
I'm in line for the full individual whack (my wife cannot work so no double-up bonus for us), but when that amounts to a few minutes' worth of income then no, it's margin of error stuff, I won't notice it.
I appreciate the gesture but I'd rather they spend it on another nurse at the local hospital, thanks.
There's a clinic in the Hutt with no doctors, just nurses.
They send every single blood test that isn't 'normal' to hematologists because they don't have the confidence or knowledge to try primary care solutions.
(About 5% of all blood test fall outside normal ranges but there is nothing wrong with the person)
The hematologists are now so overwhelmed with tests that they just flick a quick text back saying 'hematologist not needed.'
When the doctors were there, they exchanged letters and could engage with hematologists who had a bit of time to educate and discuss.
The nurses, who need more help than doctors, actually get less.
The patients get the worst possible treatment.
Enjoy your 20 bucks a week.
In my opinion , while tax cuts may seem like an attractive option, the reality is that they are a blunt and ineffective tool, particularly in the New Zealand context.
Across-the-board tax cuts do not effectively target those most in need. In a country with relatively low income inequality like New Zealand, the benefits of tax cuts tend to accrue disproportionately to higher-income earners. This means the limited fiscal resources available would be directed away from the households and individuals who could derive the greatest benefit.
The economic stimulus effect of tax cuts is often overstated.
Research has shown that the majority of tax cut windfalls are simply saved rather than spent, dampening the intended boost to consumer demand.
This is especially true in the current economic uncertainty, when households are more likely to use tax savings to pay down debt or increase precautionary savings.
The fiscal cost of tax cuts poses a significant constraint in the current environment. With government debt levels already elevated due to the pandemic response, there are limited resources available for unfunded tax cuts. This could force difficult trade-offs, potentially constraining spending in other critical areas like healthcare, education, and infrastructure.
Rather than broad-based tax cuts, the National government would of been better served by targeting tax relief and fiscal support to low and middle-income households, small businesses, and the sectors most impacted by economic shocks.
Initiatives like expanded tax credits, temporary loss carry-back schemes, and direct cash transfers are likely to have a more immediate and equitable stimulative effect.
Ultimately, while tax cuts may have a role to play in the policy toolkit, they are a blunt instrument that is poorly suited to addressing the countries current economic challenges.
A more nuanced, targeted, and fiscally responsible approach was required to support sustainable growth and ensure the benefits are shared broadly across society.
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