KEY POINTS:
Personal tax cuts are on their way - that was the promise delivered by Prime Minister Helen Clark at the Labour Party's annual conference yesterday. But neither Clark nor Finance Minister Michael Cullen would be drawn on details, except to say the cuts will happen under Cullen.
The National Party has dismissed the pledge as an election bribe, while economists say the cuts are overdue.
Clark's announcement was the first confirmation that personal tax cuts are imminent, ending months of speculation and strong hints from ministers.
"It will happen because the time is right and the money is there to do it without cutting services, and without borrowing for tax cuts," she told more than 700 delegates gathered in the Bruce Mason Centre on Auckland's North Shore.
"And when it happens, the National Party will stand exposed as the one-trick pony it is."
She claimed the trigger for Labour's about-turn on tax cuts was not next year's election, but new advice from Treasury officials.
"Every year officials have sought to explain [Budget surpluses] away by one-off factors. Now they concede the surpluses are structural... So that gives Labour more choices - not to break the bank and sacrifice our country's stability, but to deliver budgets which continue to strengthen the economy and services, and deliver hard-working New Zealanders a direct dividend through a personal tax cut," she said.
Later, Clark refused to say how much taxes would be cut by, or whether extra money would be in workers' pockets before next year's election. Cullen said the scale and form of the cuts would still have to meet his "tests": no Government borrowing, no cuts in services, no economic destabilisation, and fairness. He said it would be misleading to put figures to the public at this stage.
National leader John Key dismissed the pledge as "an election bribe".
"It's sort of typical Helen Clark - just another excuse for the overtaxing of New Zealanders, despite years of huge surpluses. It's an admission by Labour that they have been overtaxing people when they didn't need to."
He said the new line on taxes wasn't credible. "Even on Friday, Cullen was arguing it would not be 'lollynomics'. It's a public change of heart because of poor polling results. If New Zealanders want tax cuts they need to vote National. We have an ongoing programme of personal tax cuts that will be in our first Budget."
Tax expert Craig Elliffe said tax cuts were long overdue. "Everyone, except Dr Cullen, has recognised we have been overtaxed for a long time. And I guess the logic is the tax cuts should be given to the people who have overpaid that tax."
He said there was "compelling logic" for those in the highest tax bracket to be given a break. He said around 12-15 per cent of taxpayers were currently paying the top rate of 39 per cent - and that was too high.
"The best solution would be to move it all to 30 per cent," Elliffe said. Asked if he thought that was likely he said "not for a second".
ANZ chief economist Cameron Bagrie agreed, saying he suspected Cullen would aim tax cuts at middle to low-income earners. Bagrie said he would prefer it if the marginal tax thresholds were changed.
"I think it's absurd that the marginal rate kicks in at $60,000. In 1999, when it was brought in, there were not a lot of New Zealanders earning those incomes. Now there are truckloads.
"We don't want to tax people outrageously more for each additional dollar they earn."
ASB Bank chief economist Nick Tuffley said the announcement was not a surprise, but next year's Budget was where the real detail would emerge.
"It's a political situation. One of the things it would be good to focus on is a tax structure that helps boost the long-term growth prospects. Ideally we want to give people a reasonable incentive to work - more reward for their efforts."
Clark also flagged New Zealand could soon introduce routine, free immunisation of 12 and 13-year-old girls with a cervical cancer vaccine. The vaccine immunises against the sexually transmitted human papilloma virus, which causes genital warts and can lead to cervical cancer.
Carrot time
* Personal tax cuts are coming, possibly in the next Budget.
* Labour won't say how big the cuts will be, or when they will take effect.
* Economists predict cuts will target middle- and low-income earners.
* National dismisses the pledge as an election bribe.
