Households paying 10 times as much tax as rates - LGNZ

Local Government New Zealand (LGNZ) says analysis by Infometrics of household taxes versus rates, combined with recent Treasury advice, highlights the challenges councils face in funding essential services and infrastructure.

An Infometrics analysis shows that in 2025 the average New Zealand household pays around 10 times more in taxes (income and GST combined) than in local government rates.

In 2025, a two-person household on median incomes would pay nearly $40,000 to central government in PAYE and GST, compared to just under $4,000 for an average rates bill. Both totals have increased from the last time LGNZ examined these figures in 2023: while rates are up by $985pa for rates, taxes have climbed by $3,200.

Meanwhile, a recent Treasury briefing described rates as “significantly below the level that they need to be”. The report also states that central government policies should focus on how to allow rates to rise to ensure the financial sustainability of councils.

However, LGNZ President Sam Broughton says local government doesn’t want to increase rates.

“No one wants rates to rise. Instead councils need more funding tools to deliver for communities. If you just cap rates, you create a deficit for the next generation. Today’s councils are playing catch up on historic underinvestment and investing for tomorrow,” says Sam Broughton.

“We have Treasury saying in black and white that successive underspending by councils over the last 35 years, in the face of pressure to keep rates low and rate rises to a minimum, is what has driven poor asset maintenance and investment in essential infrastructure. Government plans for rates capping will see a return to this past behaviour.

“Capping rates will also cost ratepayers more. As Treasury points out, restricting local government’s ability to use rates will further impact council credit ratings. This means councils, and therefore ratepayers, will end up paying more on interest for the same amount of debt.

“S&P Global Ratings has previously warned that central government policy volatility is having a negative impact on credit ratings. S&P lowered the credit ratings of 18 councils and three council-controlled organisations in March. This just makes borrowing more expensive for ratepayers.”

Sam Broughton says that to keep rates low, councils need access to better funding and financing tools alongside rates.

“As one example, Treasury’s report calls for local government to be able to better recover the costs of growth under the Going For Housing Growth programme.

“This echoes local government’s calls for tools like a GST-sharing scheme for new builds. If the Government shared a percentage of GST collected from new housing developments with the council that issued the building consent, this would help cover new infrastructure costs like roads, water and wastewater infrastructure.

“Councils are responsible for about a third of all public infrastructure investment in New Zealand, and are now planning to spend $77.2 billion on capital expenditure programmes over the next 10 years. That’s significantly higher than past councils, because today’s councils are playing catch up.

“We’re concerned that this continued focus on low rates will again come at the expense of key council services and infrastructure development – that the community and this economy needs.”