The Government could move the top income tax threshold from $70,000 to $90,000 and pay for that by increasing the top rate of tax from 33 per cent to 34.5 per cent, an online tax calculator provided by the Treasury shows.
The change would leave anyone earning less than $130,000 a year better off, because income between $70,000 and $90,000 would only be taxed at 30 per cent.
Revenue Minister Stuart Nash wouldn't comment, with a spokeswoman noting the Government had not yet decided on its tax policy for the 2020 election.
But that kind of tax change to reduce the number of people in the top tax band is being talked up by PwC tax partner and former Tax Working Group member Geof Nightingale.
He believes the Government will face limited options after the next election, having already ruled out a broad-based capital gains tax (CGT) during Prime Minister Jacinda Ardern's term in office.
Nightingale believed it was "inevitable" that the Government would need to raise the top tax threshold to avoid gradually-rising incomes dragging even more people into the top tax bracket.
But in the absence of stronger-than-expected economic growth, a change in the Government's approach to spending, or a move to broaden the tax base, the only way to pay for that appeared to be to raise the top rate of tax, he said.
With the Government ruling out such a tax change this side of the election "you would have to be looking at Budget 2021 perhaps", he said.
At the moment, New Zealand is unusual internationally in having a relatively low top income tax rate of 33 per cent.
But it kicks in at a low threshold, at a rate just 3 percentage points higher than the 30 per cent marginal tax rate than would apply to a low-to-middle income earner on $48,001 a year.
The Treasury's online calculator which lets people play finance minister shows that because of that, only a relatively small increase in the top rate of tax would be needed to substantially hike the top tax threshold.
Moving the top tax threshold from $70,000 to $109,000 and increasing the top rate of tax from 33 per cent to 36 per cent would be another "revenue neutral" way to slash the number of people in the top tax band, and would leave only those earning more than $148,000 a year worse off.
"The primary problem is how to give some relief to people whose average tax rate is rising faster than their income because of fiscal drag," Nightingale said.
"You could fund that through economic growth and constrained expenditure but that is not what is being forecast in the next four years, so that does lead you to think at some point you may need to tweak the top tax rate."
National Party finance spokeswoman Amy Adams noted National had committed to index-linking tax thresholds so they rose with inflation.
Without that change, "the average wage-earner in just a couple of years is going to be in the top tax bracket", she said.
But she did not believe a tax-rate rise should be needed to pay for that.
"With the economic performance and loose spending we are seeing under this government, there is no question they are writing cheques the economy can't cash," she said.
"National's view though is that before you start working out how you can take more money from New Zealanders that are working hard, you should make sure all government spending is effective and properly targeted, and most importantly you should do more to support economic growth."
Also, If the top personal tax rate rose far above the company tax rate there was a risk that more people would structure their affairs to avoid income tax, she said.
"That is when you start to see all sorts of games being played."
Nightingale agreed raising the top tax rate would be a shame.
"New Zealand's 33 per cent rate is very competitive worldwide and having a modest top personal tax rate is good for the incentive to work, to attract 'high-quality' immigrants here and to keep high-quality people in New Zealand.
"I think it seems a shame to have to raise that rate, but that feels a bit inevitable to me when I look at where everything is heading and the lack of any kind of material extension to the taxation of capital income," he said.
Deloitte NZ chief executive Thomas Pippos said if the top threshold did move up "it is probably inevitable that the rate follows to help balance the books".
"Inevitability there will be political pressure to raise the threshold at which the top tax rate kicks in from the current $70,000, as wage inflation pushes more and more of the voting public to pay the top rate."
But it was possible Labour would not want tax to be an election agenda item "having experienced some negativity as a result of the Tax Working Group process".
It might prefer to let sleeping dogs lie "because a change in threshold inevitably raises the secondary question of, should the rate go up?" he said.
"Generally no one wants to pay more tax – those that derive income from capital seem to be out of the cross hairs for now – it sort of leaves less options if you need to go down that path."
HOW NZ COMPARES
Top income tax rates
NZ: 33pc on income over $70,000
USA: 37pc on income over US$300,000 (NZ$483,900)
Australia: 45pc on income over A$180,000 (NZ$189,500)
UK: 45pc on income over £150,000 (NZ$288,500)