National will pledge to cut 39c tax rate

By VERNON SMALL deputy political editor

National will promise to scrap the top 39c personal tax rate and lower the 33c company rate as part of a radical tax package due this month.

The decision, approved at last week's caucus meeting, puts tax cuts back at the heart of National's policy after the party signalled last year that extra social spending would be its first priority.

It is understood leader Bill English had pressed for a more moderate personal tax cut, pushing the present $60,000 threshold for the 39c rate up to $100,000. But the caucus backed the more radical plan to scrap the top tax step.

National is also likely to promise a cut to the 33c company tax rate, to at least match Australia's 30c rate, and put a floor on Government asset holdings to reassure voters that National would not sell off the family silver.

An end to the top personal rate would reverse Labour's April 1, 2000, tax increase, which is expected to raise $550 million this year.

Labour used the extra revenue to fund its 1999 seven key election pledges.

Today the Herald wraps up its five-part series, "The $1 billion question", assessing whether it was money well spent.

Whether it is better to tax more to spend on social issues or leave as much cash as possible in the hands of individual taxpayers will always be at the heart of the left-right political divide.

But in general terms the pledges were fulfilled.

And though social sector players are crying out for more, Labour has said it will not impose another increase in personal, company, or goods and services taxes if elected for another term.

The Herald's series has shown that the tax rise initially affected only 5 per cent of taxpayers as promised. But wage inflation and economic growth has boosted to 7 per cent the proportion of taxpayers earning more than $60,000.

As promised, the Government has not raised GST or company tax. However, businesses and individuals have been hit with higher petrol and tobacco taxes and steeper road-user charges.

In health the first steps have been taken to reduce waiting lists, but there is still a long way to go.

Millions of dollars have been put into hospitals' baseline budgets for surgery, which gives them greater certainty than the previous one-off funding.

The numbers waiting for operations and to see hospital specialists is gradually declining but funding restrictions still mean that some patients who doctors feel need treatment are forced to queue in a newly created category called "active review".

Progress has been made on the promise to put patients before profit. Crown health enterprises have been replaced by district health boards with some elected representatives. But health board deficits have ballooned to $220 million and they will have to be managed without cutting services.

The pledge to crack down on youth crime and burglary resulted in 6000 fewer burglaries last year, and 8000 fewer the year before.

Police say targeting "entry-level" crime will stop youngsters being set on the road to worse offending.

But few figures are available on whether the crackdown on other aspects of youth crime has produced any results, apart from a slight rise in arrests of 14 to 16-year-olds.

There are similar problems assessing the Government's efforts to create jobs.

A $96 million budget for industry and regional development was created - something which had hardly existed 15 years ago.

Most of the cash subsidised entrepreneurs starting new businesses or expanding existing ones.

A Herald survey of 20 entrepreneurs found they had created 53 new jobs since receiving awards a year ago. That suggests all the firms that have received enterprise awards may have created about 2000 new jobs.

This is probably more than would have been created in New Zealand if the money had been left in the hands of high-income earners who now pay higher taxes, because they are more likely than Industry New Zealand to spend on imports and overseas trips. But no research has been done to assess exactly how much difference Jim Anderton's "Jobs Machine" has made.

The return to income-related state rents has put more money in the pockets of more than 52,000 households and is likely to have spin-off effects on tenants' health. But critics say the move did not go far enough and about 150,000 low-income families renting privately have not seen an increase in their accommodation supplement.

The Government can claim that the cost of tertiary education is lower than it would have been without its move to freeze fees and wipe interest on loans while students are studying.

Fees for veterinary, medical and dentistry students have been lowered and the student loan scheme opened to prisoners.

But critics say the cost of living continues to rise. Getting access to an allowance is difficult and earnings are tightly monitored.

The pledge to restore superannuation for a married couple to 65 per cent of the average wage was met - in fact it was increased to 67 per cent of the average wage.

The scheme to partly pre-fund the cost of super has been established, but as a charge on the surplus, not as a "proportion of all income tax".

Only a slim majority of MPs support the scheme.

Feature: The $1 billion question