John Armstrong: Crumb leaves empty feeling

Worked out how you are going to spend your tax cut? All $6 to $10 of it?

No hurry. You've got the best part of three years to think about it.

Michael Cullen's tax cut is a tax crumb. You'll need a microscope to find it and an alarm clock set to April 2008 to remind you of when you'll actually get it.

So much for the feverish pre-Budget anticipation that the Finance Minister would bow to election-year expedience and cut taxes through the back door by significantly raising the income thresholds at which higher rates kick in.

Dr Cullen is innocent of any blame for that speculation gathering pace. But he should plead guilty for failing to kill the rumours in advance of delivering his sixth Budget yesterday.

The upshot is that the Budget's meatier elements - such as his showpiece workplace retirement savings scheme, which neatly doubles as a home deposit savings vehicle - have been somewhat upstaged by a tax cut that hardly lives up to the name.

If Dr Cullen's colleagues thought they could twist his arm to give a decent cash concession to those electorally-crucial middle-income voters who miss out on the Working for Families assistance - and thus head National off at the tax cut pass - they failed abysmally.

Dr Cullen was doomed to disappoint. He was never going to do a u-turn on his repeated warnings that substantial tax cuts would overheat the economy and force the Reserve Bank to hike interest rates, while simultaneously blowing a large hole in the Government accounts.

Whatever argument took place around the Cabinet table, the resulting minimal adjustment in the tax thresholds reeks of compromise and is nothing more than token.

So modest is the impact on take-home pay - $6 and $10 a week respectively for those on $40,000 and $64,000 - that you wonder why Labour bothered.

The best that can be said is that no one can accuse Dr Cullen of trying to bribe voters - doubly so given they will have to wait until 2008 to get the money.

However, the token "tax cut" is the worst of all worlds - too small and too late to entice voters, but still offering a benchmark for National to draw unfavourable comparisons with a much more radical package of ideologically driven tax cuts which it will wheel out in the next few weeks.

That leaves Dr Cullen trying to paint the election as a stark choice between what he claims is the irresponsible short-termism of National's large tax cuts versus Labour's sound fiscal record.

In short, he is saying voters have a choice between profligacy and security.

Unfortunately for Labour, Dr Cullen's reluctant toying with tax cuts has made this Budget so underwhelming, no one may be listening.