What will the tax cuts mean for you?KEY POINTS:
Labour will put more into voters' pockets weeks before this year's election in stage one of its tax-cut plan.
But they will have to wait 18 months for the second stage, and until Rugby World Cup year for the last.
National Party leader John Key said last night
he was not certain of the timetable of his party's tax plan, but no one would be worse off after yesterday's Budget adjustments.
Michael Cullen's first personal tax cuts in nine Budgets will take effect on October 1 and combine a cut in the bottom rate with a gradual shift in thresholds - meaning workers can earn more before higher rates apply.
The October tax cuts will cost $1.5 billion and when all three stages are implemented the cost will be $10.6 billion.
A tax cut law is expected to pass through Parliament today under urgency - with the support of National.
This law is seen as a political requirement, needed to reassure voters after the Government's last personal tax cuts, in 2005, were cancelled.
The Budget gives something to everyone who works, to superannuitants, and to beneficiaries with children, who receive family support.
The only people who miss out are beneficiaries with no children who have no part-time job.
The biggest surprise of the Budget was the generous treatment of the 500,000 superannuitants.
Dr Cullen delivered a fiscally tight Budget with a cash deficit of $3.5 billion and forecasts of similar amounts over the next four years, making it difficult for National to say "me too" to Labour's policies.
It is likely to be squeezed into identifying existing policies it would cut or borrow more.
Speaking yesterday about the cash deficit, Dr Cullen said: "That is the limit of my comfort zone. Beyond that we are starting to borrow for the groceries."
Mr Key said National would "reprioritise", and acknowledged it would need to spell out in an alternative Budget before the election which of Labour's policies it would scrap.
"It's not a question of whether spending is 'nice'. Most Government expenditure is 'nice'," Mr Key said.
"There are certain times when it becomes luxury, and we think that at a time when New Zealanders are struggling, the number one priority is to put money in the pockets of hard-working New Zealanders and we are prepared to prioritise that over other initiatives."
Mr Key said National would probably wait until the start of the election campaign before unveiling its own economic package.
Cheese analogies abounded in talk about the Budget, led by Mr Key, who said it would give the average worker only enough to buy a family-size block of cheese.
The tax cuts will be from $12 to $28 a week in October, and by the time they are fully implemented in April 2011, the total extra will be $22 to $55.
But adjustments to Working for Families, including indexation of the thresholds for the family tax credit, give substantially bigger income boosts for couples with children.
By the time the tax plan is fully implemented the gains from tax cuts and changes to Working for Families could be as high as $85 a week.
Fiscal drag has more than doubled the number of taxpayers paying the top 39c-in-the-dollar rate since Labour took office in 1999.
Changing the tax thresholds means that by April 2011, the 39c rate will apply to income over $80,000 rather than $60,000 at present.
That will have removed 300,000 taxpayers from the top bracket.
GDP growth is forecast to drop from 3.1 per cent in the present year to 1.5 before lifting again to 2.3, then 3.2 per cent in 2011.
Tax revenue is forecast to drop in the next financial year by $200 million to $56.5 billion, then pick up in the following three years.
