'National's tax cuts will still woo voters'

John Key

National finance spokesman John Key is relaxed that his party's tax cuts will still look attractive to voters after Labour's lolly scramble for families.

Prime Minister Helen Clark has promised the Government's Working for Families tax breaks package will be extended to another 60,000 families if Labour is re-elected.

Mr Key said he was "very relaxed" about National's plans in comparison to Labour's package.

National would deliver across the board tax cuts, and powerful incentives to get ahead, he said.

It was "tragic" that a big bunch of New Zealanders, who were not the ones Labour was trying to buy votes from, would end up paying for the Labour package which was heavily skewed toward large families on low incomes, he said.

"It doesn't make sense to have someone on $80,000-$90,000 a year and to make them enrol in a welfare package when you're charging them the top personal rate in taxation. I mean, I find that quite bizarre."

National has already outlined business cuts worth about $1 billion a year and is expected to offer up a similar amount in cuts to personal income rates.

The Labour announcement strikes a pre-emptive blow against National's tax cut policy, which will be released on Monday.

However, Mr Key said there was no need for National to review its tax policy in light of the Labour announcement, which he labelled a "giant welfare package".

"The level of over taxation is no surprise, was figured into our calculations and is consistent with previous years."

Helen Clark announced the tax breaks minutes after the Government opened its books yesterday revealing Treasury now expected $1.58 billion more revenue over the next four years than it had predicted in May.

She said Labour would put $1.35 billion of that into extending its families tax credit package to 60,000 more families.

The move would also mean more cash in the wallets of the 300,000 families already getting something from the package.

Under the changes almost all working families earning below $70,000 a year, with children, would be eligible for a tax credit from April next year.

Helen Clark said families with three children earning up to about $90,000 would now become eligible, as would families with four children earning up to $110,000.

Families with children and an income of less than $35,000 a year would, in effect, pay no tax at all from April 1.

The extension would cost an extra $438 million a year by 2009 -- an amount that would not need government spending cuts or borrowing, she said.

It would lift the total cost of Working for Families to about $1.5 billion a year.

Finance Minister Michael Cullen said the $1.6b extra over four years was a less than one per cent increase on the about $230b in revenue. But it allowed the Government to extend its families tax relief package to middle income families.

The only ones to miss out were parents with adult children, high income earners, and middle-to-high income earners without children.

Any policy announced now which helped people could be called an election bribe, Dr Cullen said on TVNZ's Close Up programme.

However, Labour had said that rather than spread tax cuts thinly across 2.5 million or more taxpayers "we're going to concentrate on families".

 

United Future, the Green Party and trade unions all welcomed Labour's announcement.

New Zealand First leader Winston Peters said Labour was trying to win the election by overtaxing New Zealanders and then appearing magnanimous by giving it back.

"While New Zealand First agrees New Zealand families need relief -- and New Zealand First will be releasing the first part of its economic plan on Monday to achieve this -- creating greater dependency through benefits is not the way forward."

Act leader Rodney Hide said working people did not want handouts, they wanted tax cuts.

- NZPA