Some minimum wage workers will find themselves in the 30% income tax bracket after the Government's decision to hike the minimum wage in line with inflation, reports the New Zealand Taxpayers' Union.
Union spokesman Louis Houlbrooke says, "Someone working 44 hours a week on the minimum wage will now be paid annually
$48,505.60, placing them in the 30% income tax bracket. In other words, their real buying power hasn't increased, but
they'll be paying a larger proportion of tax, meaning they're worse off after tax."
"The real killer here is the way tax bracket creep destroys the incentive for New Zealanders to do better. Minimum wage
workers will now have nearly a third of the reward for upskilling, working overtime, or achieving a promotion nixed by
the taxman."
"Bracket creep has been stealthily taking more and more from workers unchecked since tax brackets were set in 2011. If
brackets had been adjusted for inflation, the 30% tax bracket wouldn't kick in until $56,822, and minimum wage workers
would be safe from punishingly high tax rates."
"The decision to respond to inflation by simply raising the minimum wage is destructive, optics-driven politics. It beds
in the effects of inflation, ensuring that employers are hammered with higher costs that you can be sure will filter
down to higher prices for consumers – which in turn means more inflation. It's a dangerous spiral that this Government
appears only too happy to fuel – perhaps because Grant Robertson benefits from the higher tax revenues."