National finance spokesperson Nicola Willis has signalled her party will go into the 7 November election promising to adjust income tax settings for bracket creep and to boost the research and development tax credit. Voters will have to wait for the detail until after Treasury opens the books on 29 September.
Willis made the remarks on Tuesday morning on an economy panel at BusinessNZ’s election conference in Wellington, alongside Labour’s Barbara Edmonds, ACT leader David Seymour, New Zealand First’s Shane Jones, Green co-leader Chlöe Swarbrick and Opportunity leader Qiulae Wong, RNZ reported. Te Pāti Māori was not represented.
The panellists were asked what one tax or regulatory change they would make to support business. “I’ve got a newsworthy thing to say,” Willis said, pointing to BusinessNZ’s election manifesto, which she said reflected the success of the research and development tax credit.
She went on, according to interest.co.nz, “It’s something businesses value. It’s getting them investing in more research, development, innovation and science. And so we will wait until after the pre-election fiscal update to make a specific announcement, but that’s the next cab off the rank for me.”
Pressed by conference MC Ryan Bridge, Willis said she thought increasing the credit made sense but would not say by how much.
The credit currently pays 15 percent of eligible research and development spending. Businesses must spend at least $50,000 a year to qualify, and eligible spending is capped at $120 million a year, according to Inland Revenue. Newswire covered the scheme’s growth in July.
The bigger promise for households was on bracket creep. That is what happens when inflation lifts pay packets and pushes more of a person’s income into higher tax brackets, even though their spending power has not grown.
When the panel was asked whether anyone would deal with it, Willis put her hand up. She said National had a track record on the issue, having been the only party to reset tax thresholds in 14 years, Newstalk ZB reported. If National could keep to its Budget Responsibility Rules, she said, the priority should be adjusting tax settings so that “working people on average wages aren’t being slapped with bigger and larger effective taxes every year”.
Willis said there were other ways of adjusting tax settings besides shifting the current brackets, such as looking at rates and at which thresholds could be moved. She said “you should always be trying to reduce the effective marginal tax rate, so that working people on average wages, working full time, aren’t facing punitive tax levels when they get a promotion”.
Income tax thresholds were last changed in July 2024. The 17.5 percent rate now starts at $15,601, the 30 percent rate at $53,501, the 33 percent rate at $78,101 and the 39 percent rate above $180,000, Inland Revenue’s rate table shows.
The Taxpayers’ Union responded within hours with figures from its briefing paper The Inflation Tax, which adjusts those thresholds for consumer price inflation through to the June 2026 quarter. It says the 30 percent threshold should already sit at $56,801.95 and the 33 percent threshold at $82,920.23, and that leaving the brackets alone is costing someone on the median salary of $73,788 about $480 a year.
“Tax brackets should not quietly become tax rises just because prices and wages go up,” spokesman Austin Ellingham-Banks said in a statement.
Newswire checked those numbers against the Stats NZ consumers price index. The index stood at 1280 in the September 2024 quarter, when the new thresholds took effect, and at 1359 in the June 2026 quarter, a rise of 6.2 percent. Applying that rise to all four thresholds reproduces the union’s figures to the cent. It would lift the bottom threshold to about $16,563 and the top one to about $191,109.
On our calculation, someone earning $50,000 is paying about $67 a year more than they would under brackets indexed that way. Anyone earning between about $83,000 and $180,000 is paying about $625 more, and someone on $200,000 about $1,291 more. The figures leave out ACC levies and tax credits, and measuring from the June 2024 quarter rather than September would make the gap slightly larger. Annual inflation was 4.1 percent in the June 2026 quarter.
Not everyone on the panel wanted the brackets moved. Seymour said the first priority was getting on top of debt, and that moving brackets eroded the tax base. “We have an extremely progressive income tax system, we’re paying almost four times the rate at the top that you are at the bottom, and you don’t delve into those higher rates just because of inflation,” he said. He would rather “start using any extra revenue we have to flatten the rates, which would be far preferable for simplicity, for incentives”.
Jones, whose party governs alongside National and ACT, told the audience every dollar restored to the economy was a choice, and urged people to “be very careful, given the challenges that we’ve already got as to how much revenue you take out of the revenue line, if in actual fact, you can’t deliver the reductions”.
Edmonds pointed to Labour’s already-announced capital gains tax, which she said would also “streamline” land rules in the Income Tax Act and give businesses certainty. Swarbrick said the Greens would boost competition, particularly in the energy and supermarket sectors, while Wong said Opportunity would give the Commerce Commission more teeth to act on the “screeds of reports and recommendations” it had already put out.
Treasury’s pre-election economic and fiscal update is due on 29 September, less than six weeks before election day. Until then, National’s tax pitch remains a signal rather than a costed promise. If you are still working out where the parties stand on tax and everything else, Newswire’s voting tool can help you compare them.
Should the next government index tax brackets to inflation automatically, or is a bigger research and development credit a better use of any spare money? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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