Act party reveals tax policy

Every worker would get a tax cut under Act's policy, announced today by party leader Rodney Hide.

He said there would be only two rates -- 15 cents in the dollar on income up to $38,000 and 25 cents in the dollar on income above that.

Company tax would also be cut to 25 cents from its current 33 cents.

"That would be a tax cut for every worker and a big boost to the economy," Mr Hide said in a statement.

"Treasury says tax cuts of this magnitude would add 1 per cent to 1.5 per cent to New Zealand's growth rate."

Mr Hide said the average wage earner with an income of $41,300 would get a tax cut of $1974 a year, or $38 a week.

The cost of Act's tax policy in lost revenue would be $5.7 billion a year.

Mr Hide said that was less than this year's budget surplus of $7.4 billion.

Current tax rates are 15 cents on earnings up to $9500, 21 cents up to $38,000 and then 33 cents until the top rate of 39 cents cuts in at $60,000.

The Government offered tiny tax cuts in its budget last week, effective from 2008.

National and Act are keen to capitalise on that, and Act is the first with its policy launch. National is due to release its policy within the next few weeks.

Mr Hide said his party's cuts were affordable and easily achievable.

"Unlike Labour, Act believes that Kiwis should keep more of their hard-earned money," he said.

"These tax cuts would mean a 7 per cent pay rise for a worker earning $41,000 a year."

Mr Hide said it would not be necessary to borrow to fund the cuts.

"The fiscal cost in year one is $5.7 billion. This is $1 billion less than the forecast operating surplus for 2005/06," he said.

"The $21 billion in surpluses over (the next) four years provide a starting point for funding the lion's share of the tax cuts package."

Mr Hide said the cuts would not drive up inflation.

"Inflationary pressure is coming from the government sector, with increased charges, petrol taxes, power price rises, local council rates, to name a few.

"All Act's tax policy does is return the over-taxation to households and businesses. Much of this will be saved, or used to pay debt."

- NZPA