KEY POINTS:
The so-called "chewing gum" tax cuts that almost cost Labour the 2005 election have been permanently stuck to the bedpost by Finance Minister Michael Cullen.
Dr Cullen yesterday cancelled the only personal tax adjustments he has promised in eight Budgets and with it the promise to future-proof income tax thresholds against inflation.
Stung by the trenchant criticism over his promise in 2005 to raise tax thresholds in three years' time, Dr Cullen has been threatening to renege on the promise ever since.
Yesterday he finally did.
"You can't one year say it was chewing gum then complain because it was taken away," he said curtly.
The adjustment to the thresholds was to have taken effect from next April and documents released with the Budget yesterday show that, in the 2008-09 financial year, it was estimated to cost $395 million a year, $425 million the following year and $535 million the following year. The term "chewing gum" Budget was coined by New Zealand First leader Winston Peters, who was not a support partner of Labour at the time or Foreign Minister as he is now.
The term was derived from comparisons between the approximate cost of a packet of chewing gum and the minimum benefit a taxpayer was to have had from the threshold movements, 67c.
At the upper end, higher income taxpayers were to have benefited by about $10 a week.
Adjustments in the tax thresholds were to have been made every three years.
Social welfare payments and payment made under Working for Families are linked to the consumer price index.
