National rethinking its tax policy

By COLIN JAMES

Fresh from its stunning rise in the polls on the back of a hard line on Maori policy, the National Party has been mulling over moderating some other policies.

Sources say that in a caucus discussion on tax policy last month, MPs leaned towards gentler tax cuts than the party promised in the 2002 election.

However, firm decisions will not be made until after the May Budget.

In the 2002 campaign National promised to cut corporate tax to 30 per cent and the top personal rate to 35 per cent and lower both by 1 per cent a year during its first three-year term (that is, to 27 per cent and 32 per cent), with a 10-year aim of 25 per cent in each case.

Leader Don Brash told the party's conference last year that the corporate and two top personal rates should be 30 per cent.

Brash said in an interview that the 30 per cent corporate rate would remain official policy for the first term of a National government and the current 33 per cent rate (for incomes up to $38,000) would go to 30 per cent. Sources say MPs are leaning towards keeping the 2002 initial top rate of 35 per cent on incomes above $60,000, a 4 percentage point cut from the present 39 per cent.

But they also say that discussion leaned away from a commitment to cut the rates further during the first term of a National government, as in the 2002 policy, and also from a commitment to longer-term cuts.

In part, these sources say, that is because MPs favour leaving in place Finance Minister Michael Cullen's planned Budget tax cuts and higher rebates for low- to middle-income earners, though a National government may not carry through Cullen's whole programme if it is uncompleted by the election.

Current estimates are that Cullen's programme will be phased in over four years.

Why the more cautious line?

In part, one MP says, it reflects a lingering influence of the centrist "brat pack" MPs who dominated the leadership after 2001. And a softer stance on tax would make it more difficult for Labour to paint National as a bogey on the economy - and as just promising tax cuts for the rich - to counter its polling success on Maori issues.

How far a National government would go towards meeting Brash's challenge to the party conference last year on spending has also yet to be resolved. He challenged the party to "restrain government spending to grow by no more than the rate of inflation and the rate of population growth" which would, he said, reduce the proportion of GDP the government spent by 5 percentage points.

Aside from tax, National is reported by some sources to be taking a less aggressive position on selling state assets than some of Brash's early statements implied and reconsidering its opposition to the Kyoto Protocol.

In any case Brash has been hedging some of his statements on Maori.

In his Orewa speech he said the Maori parliamentary electorates would be abolished. He has since moderated that to a promise of a referendum (though a referendum would probably pass).

He has backed off his earlier comments about "tangi leave" and about Maori graduates not being seen as equal to non-Maori because of the quota system of entry.

* Email Colin James