Act's plan for tax changes would cost $5.7 billion

Act says the average worker will be $40 a week better off under its tax policy. The party proposes two rates of income tax: 25c in the dollar for earnings over $38,000 and 15c in the dollar for earnings below that.

Current tax rates are 15c in the dollar on earnings up to $9500, 21c up to $38,000 and then 33c until the top rate of 39c cuts in at $60,000.

Act would also reduce the company tax to 25 per cent from the current rate of 33 per cent.

The cost of the tax cuts would be about $5.7 billion - which the party says is $1 billion less than the surplus forecast for this year.

However, Finance Minister Michael Cullen said Act's tax policy would drag New Zealand back to "the borrow-and-hope politics of Muldoonism".

Act leader Rodney Hide said that under Act's policy, every worker would get a tax cut while the average wage earner with an income of $41,300 would get a tax cut of $1974 a year, or $38 a week.

Dr Cullen had different calculations: "It means $24 a week for somebody on $30,000 a year, $215 for a backbench MP and $535 a week for a deputy prime minister.

"So it immediately fails any kind of fairness test."

- NZPA, STAFF REPORTER