National's tax sweetener for two million

Don Brash announces National's tax policy at Sky City Convention Centre yesterday. Picture / Kenny Rodger

More than two million taxpayers will benefit under National's $3.9 billion tax-cut plan unveiled in Auckland yesterday in a key moment in the election campaign.

The main changes will be phased in by April 2007 and up the ante in the bidding war with Labour, which immediately called the plan a "big tax bribe" that would mostly benefit the rich.

But National leader Don Brash, who launched the "fair tax" plan at the Sky City Convention Centre, said it was fair to all taxpayers because it supported low- and middle-income families.

The policy will see a single-income earner with no children on $50,000 get $28 extra a week ($1470 annually) from April 1, 2006, and $46 a week ($2370 annually) from April 1, 2007.

Personal tax cuts will be phased in over those two stages.

The company tax rate will be cut from 33 to 30 per cent in April 2008.

The actual impact on the wallet of the cuts vary according to a taxpayer's income and how many children, if any, he or she has.

The key feature of the plan is a big adjustment to income tax thresholds.

Incomes between $12,500 and $50,000 will be taxed at 19 per cent, between $50,000 and $100,000 at 33 per cent and above $100,000 at 39 per cent.

National is also giving to superannuitants, with an annual net payment for a married couple of about $320 next April, rising by inflation to about $410 in April 2007 and about $560 from April 2008.

That's because the reduction in tax on the average wage will flow through to superannuation payments.

Super is paid at 65 per cent of the net average weekly wage.

Another feature of National's plan is that it will keep Labour's income-boosting Working for Families package, but only as an interim measure while it develops its own family tax package.

Dr Brash said those benefiting from Working for Families would not be worse off under National.

"Nobody will be worse off from this change; we are comfortable with this level of support. But the method of delivery must change."

However, National would scrap the scheduled extra $10-a-child payment being introduced in 2007, as the existing payments as well as tax cuts were sufficient.

Dr Brash said scrapping the carbon tax - to cost about $360 million a year in lost revenue - would benefit all taxpayers by saving the average household at least $200 a year from 2007.

The top 39 per cent rate was still too high and would still cut in at too low a threshold - $100,000 - but further changes would have to wait as the priority in National's first term would be to reduce rates for low- and middle-income people.

Tax cuts would also benefit those with student loans, Dr Brash said.

With the previously announced plan making interest on loans tax-deductible, the policy would have a large impact on the ability of people to repay loans quickly.

In a move signalled at Sunday's campaign launch, he said National would cut the default withholding tax rate on secondary employment from 33 per cent to 19 per cent.

Finance Minister Michael Cullen slammed National's tax-cut package as unfair, unaffordable, unworkable and hypocritical.

He said there was no regard to family circumstances and it delivered the biggest benefits to those in the top incomes. Someone on $20,000 a year got a $6-a-week tax cut while someone on $100,000 got $92 a week.

Dr Cullen warned that tax cuts would lead to essential spending on health and education being slashed.

And he said that for the first time since the Muldoon era, a major political party was promising to borrow to pay for current consumption.

Prime Minister Helen Clark told the leaders debate with Dr Brash on TVOne last night that two-thirds of taxpayers would get less than $10 a week under National's plan.

But National finance spokesman John Key said she was wrong and the average would be more like $15. Fulltime workers would average $25.