How Close Is New Zealand to Its Revenue-Maximising Top Tax Rate?

Abstract

This note asks how close New Zealand’s 39% top personal income tax rate is to the revenue-maximising rate. Using Inland Revenue taxable-income tabulations for FY2010–FY2024, we estimate the concentration of income above the top threshold and apply a sufficient-statistics approach based on the elasticity of taxable income to top-rate revenue analysis. Benchmark calculations place the current top rate below the revenue-maximising point, but the margin is more modest in practice once GST and stronger top-end responses are taken into account. Any practical headroom above 39% depends heavily on taxable-income responses and on whether a higher top rate is accompanied by policies that protect the tax base, including anti-avoidance provisions.