KEY POINTS:
Finance Minister Michael Cullen has hinted that higher earners may get more than those on low incomes from the Government's intended tax cuts.
Dr Cullen yesterday flagged the possibility of two rounds of tax cuts being announced in the election year budget.
New Zealand's longest run of economic
good news in a generation meant Treasury was now factoring $1.5 billion a year in tax cuts taking effect from April 2009.
Dr Cullen has previously spelt out four tests for his cuts - that they are affordable, don't fuel inflation, don't require borrowing or cuts to services and that they don't increase inequality.
On the last count, Dr Cullen today said he was committed to trying to give a tax cut that did not favour the rich, but he acknowledged that could prove difficult.
"We've said very clearly we don't want to add to inequality by means of these tax cuts," he said on Radio New Zealand.
But it was "very hard not to give a bit more to those at the upper end to those at the lower end" because of the structure of the tax.
One option that would provide an equal cut to all taxpayers is introducing a tax-free threshold at the bottom of the tax scale.
However such a move could face criticism for not addressing so-called "bracket creep" caused by inflation in relation to the other thresholds.
Dr Cullen is refusing to comment on the timing, size, shape or scope of personal tax cuts until closer to the budget, but said two rounds over the next four years were now "probable".
Raising thresholds, cutting rates and a lump sum repayment were design details Dr Cullen refused to rule in or out.
As well as across the board tax cuts, he said there could also be a "refreshing" of the Working for Families package over that period.
"There's always continued stress on lower and middle income families.
"But the priority at this point, having dealt with Working for Families, is across the board - those people who didn't get anything out of the Working for Families package."
National leader John Key yesterday said Dr Cullen's plans to offer tax cuts in next year's budget was too little, too late.
"He's had the money, the capacity, the inflationary environment to actually cut taxes for New Zealanders. He's chosen not to."
The $1.5b could put on average $15 a week back in taxpayers' pockets and Mr Key said by the time people saw it they would have put up with a decade of paying too much tax.
"It's a disgrace. We are going into Christmas where the Government's wallet is bulging and New Zealanders are struggling to pay the bills, to afford one or two of the niceties of Christmas and Michael Cullen seems to think his economic management is so great because he is sitting on a mountain of New Zealanders' cash."
National was yet to finalise its own tax cuts programme.
"There's no question there's plenty of capacity there. There's no question about our intent. We intend to roll out a programme of ongoing personal tax cuts and I think the figures today quite clearly demonstrate we can afford to do that and do that in a way that will be meaningful for New Zealanders."
- NZPA
