An autopsy of 14 years of ‘fiscal drag’

Finance minister Nicola Willis headed into 2024 talking up the prospect of tax relief. (Image: NZME)

Tue, 20 Feb 2024

Income tax brackets have not been adjusted since 2010. Since then, and especially in the past couple of years, wages and prices have increased significantly.Without any adjustment to tax brackets, people at every rung on the income ladder end up paying an increasing share of their earnings in tax.This phenomenon, called “fiscal drag” or “bracket creep”, is effectively taxation by inflation.As an example, the median wage worker – who currently earns around $66,000 a year – saw their effective tax rate rise fro...

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