A household with an income of $65,000 a year is likely to be better off by around $12 a week under tax changes in the upcoming budget, according to the New Zealand Institute of Economic Research (NZIER).
The calculation takes into account the impact of a likely reduction in personal income tax and increase in goods and services tax (GST) but does not include potential changes to Working for Families or potential changes to investment property.
Likely tax changes in the upcoming budget will leave most households better off, NZIER said. The tax burden of income tax and GST would remain broadly unchanged.
"Improving tax incentives, by encouraging work and discouraging consumption, will be important for New Zealanders' long-term economic prosperity. These changes would be a step in the right direction, but need to be part of a broader package of policy reforms to raise New Zealand's growth potential," NZIER said.
The tax package would not have a meaningful impact on the economic outlook over the next year, NZIER said.
A single income superannuitant household was likely to be $7 a week better off. Households with income below $19,000 would get nil benefit, while households with an income over $146,000 would be $90 a week better off.
Households with an income between $90,000 and $109,899 would be $37 a week better off. Those earning between $109,900 and $145,999 would be $61 a week better off.
A household with an income between $19,600 and $37,099 would be $2 a week better off.
"High income earners will benefit the most from income tax cuts and the proposed GST increase. This is because high income earners pay more tax, both in absolute terms and as a percentage of their income. They earn more and spend more," NZIER said.
Changes to Working for Families would most likely be aimed at denying high income households access to social welfare, and this could reduce the net gains to these households. Investment properties were generally owned by higher income households, who may face a higher tax bill as a result of changes to the tax treatment of investment property.
Landlords may seek to increase rents, which would impact more on lower income households. However, large rent increases were not likely.
Speaking to the International Fiscal Association conference in Christchurch today, Revenue Minister Peter Dunne said changes to the tax treatment of property were likely.
"There are also likely to be lower personal taxes across the board - not just for the top end of the income scale as some allege - to encourage productivity, investment and saving," he said.
The proposal that GST be lifted to 15 percent, would only go ahead if appropriate compensation was provided for those who need it, while no exemptions for specific items would be introduced, Mr Dunne said.
The issue of the company tax rate and its relationship to the top personal tax rate and that of trusts was still being considered.
Recommendations from the Tax Working Group were still being reviewed by the Government and final decisions on the overall shape of any tax reforms would be announced in the budget on May 20.
