A word from Jaqui Dean, MP for Waitaki


Situation requires income tax action

Many readers will be familiar with the saying “nothing is certain but death and taxes”, and while this is quite true, the amount of tax we have to pay is not set in stone – it can and should change when the time is right.

That time is now.

Inflation is at a 30-year high and we are now in the midst of a cost-of-living crisis.

When I talk with people around Central Otago, they tell me that times are tough.

The cost of petrol, rent, food and other basics is going through the roof.

While the blame does not lie solely with the Government, it does have an important role to play in mitigating its impact.

It was good that the Government finally accepted this week that there is a cost-of-living crisis.

The tweaks to petrol tax will provide some relief, but more needs to be done.

What we need is targeted government spending that doesn’t add fuel to the inflationary fire.

We need greater accountability for wasteful spending on pet projects like Auckland’s light rail, which is set to be a $15billion disaster.

Income tax needs to be adjusted for the current situation.

One of the hidden costs of inflation is bracket creep, where earners are paying more tax solely because of inflation.

Someone on the average wage now has a partial marginal tax rate of 33%.

That’s not right.

If the Government adjusted the bottom three income tax thresholds to account for the inflation we’ve seen over the past four years that would help.

If they did this, anyone earning over $14,000 or receiving NZ Super would be better off.

The average earner would keep an extra $870 a year. Of course, this wouldn’t be a massive windfall, but it would make things a bit easier.

There wouldn’t have to be cuts to important areas like health and education to pay for it, because the Government already has its new $6billion spending allowance up its sleeve.

Further measures must be taken and time is of the essence.

The Reserve Bank’s forecast shows annual inflation is set to get worse, increasing to 6.6%, while ANZ has forecast that inflation could hit 7.4% in the second quarter of this year.

The average Central Otago family is worse off than they were 12 months ago, which is incredibly hard for people who just want to put food on the table, put petrol in their car and pay heir weekly bills.

Tax relief, by adjusting tax brackets to account for inflation, is a sensible step.

I hope the Government picks this idea up and runs with it as part of Budget 2022.