Christopher Luxon says inflation-related income tax cuts ‘not on our radar’
Tuesday, 28 July 2026
Prime Minister Christopher Luxon says he wants the Government to look at adjusting income tax brackets to reflect inflation “from time to time” but it is not a priority.
National campaigned hard against so-called “bracket creep” in Opposition - the “fiscal drag” phenomenon where people pay more tax over time as more and more people earn higher wages, but income tax thresholds do not rise in tandem.
Luxon in his first state of the nation speech accused Labour of “using inflation as another tax grab by stealth” and promised to fix the issue. In August 2022, he said that “inflation indexation remains a key commitment of any future tax plan”.
The party eventually campaigned on a single adjustment of tax thresholds to take brackets to where they had been in 2017, and carried this out in Budget 2024.
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Speaking in the days ahead of that Budget, Luxon reiterated a belief in fighting bracket creep.
“As a Government, we have a responsibility to ensure we aren’t just relying on inflation to do our dirty work for us,” Luxon said.
Inflation has continued since Budget 2024, meaning bracket creep has continued along with it.
Asked about whether bracket creep was on his radar for a second term on Monday, Luxon was non-committal.
“We'll continue to look at it from time to time,” Luxon said.
Asked if that could be in the next Parliamentary term, Luxon replied: “that’s not someone on our radar at this point in time.”
He noted that his adjustments in 2014 were the first in 14 years and criticised Labour and unions for not supporting them.
Jordan Williams of the Taxpayers’ Union lobby group said this was not good enough.
“Unless you are adjusting tax thresholds at least every term all your are doing is putting taxes up,” Williams said.
“They talk the talk, but not adjusting for inflation is not walking the walk.”
The National/NZ First coalition agreement commits the Government to checking in on fiscal drag regularly, with IRD producing a briefing on the matter in December of 2025.
That document found that the 2024 changes made up for about a third of inflation-driven bracket creep since 2010.
Finance Minister Nicola Willis indicated in Opposition that the Government would look to make further tax reductions outside of its announced policy when fiscal conditions allowed.
The Government is currently spending more than it brings in, with a deficit of $9.5 billion for the 11 months to May, excluding ACC spending.
Government borrowing is relatively expensive. The 10-year bond yield - a proxy for how expensive government borrowing is - currently sits at 4.72%.