Jacinda Ardern explains why most MPs wouldn't pay new top tax rate

The Labour Party is campaigning on a new top tax rate of 39 percent - but this won't apply to most MPs.

The proposed tax rate will kick in on income over $180,000 - about $16,000 more than the majority of MPs earn, with a base yearly income rate of around $164,000. This is increased if they chair a select committee, and doesn't include their expense allowance.

Defending the tax hike plan on Wednesday, Labour leader Jacinda Ardern said that she and her ministerial colleagues would be included in the 2 percent of Kiwis who will have to pay more tax if they win a second term.

"My colleagues who are ministers are amongst those [who'd pay the higher tax rate], and we know that this is the right thing to do," she said.

"It is about balance; it is about finding solutions for the times that we are in and continuing to make sure we can see all New Zealanders have a high-quality health and education system."

Ardern was questioned if she had considered dropping the threshold down to $140,000 or $150,000 to capture the majority of New Zealand's MPs in the tax net.

"For us it's not just about those factors, for us it was about how can we make sure we are bringing in revenue that helps secure those services New Zealanders most value, that affects a small number of New Zealanders - less than 2 percent - but also provides people certainty," she explained.

"This is a really difficult time in New Zealand's history, in the globe's history. We've chosen a policy that we feel balances the certainty and confidence people need right now."

The statement announcing the policy repeatedly emphasises that most Kiwis won't see an income tax change as the other thresholds will remain the same.

"We know New Zealanders want certainty and stability at the moment," finance spokesperson Grant Robertson said on Tuesday.

"This policy is about maintaining investment in important services that are so crucial for New Zealanders like health and education, while keeping tax rates exactly the same as they are now for 98 percent of people."

If Labour is in Government after October 17 and implements the change, the progressive income tax thresholds would look like this:

  • Any income up to $14,000 - 10.5 percent
  • Extra income over $14,000 and up to $48,000 - 17.5 percent
  • Extra income over $48,000 and up to $70,000 - 30 percent
  • Extra income over $70,000 and up to $180,000 - 33 percent
  • Extra income over $180,000 - 39 percent.