No more tax rises in second term, pledges Cullen

By VERNON SMALL deputy political editor

Labour will not raise personal taxes, corporate taxes or GST during a second term.

Finance Minister Michael Cullen has previously said he would not make significant changes or raise personal or business taxes or GST without first seeking a mandate at the general election.

But he has now told the Weekend Herald that, despite apparently widespread support for Labour's 1999 pre-election pledge to take more from the better-off to pay for election promises, he will not be repeating the exercise.

Labour is likely to unveil a second pledge card at its annual congress in May, but it is being billed as more general than the specific policies on the 1999 card.

Before the last election, Labour campaigned on a plan to raise an extra $450 million a year by increasing the top 33c rate to 39c on personal income above $60,000, affecting the top 5 per cent of taxpayers.

The rise, to pay for its pledge card promises on health, superannuation, crime, industry development, state house rentals and student loans, took effect on April 1, 2000.

Since then, the Treasury estimates it has raised more than $1 billion from the extra tax step, and in the 2002-03 year expects to take a further $588 million.

Seven per cent of taxpayers are now affected by the 39c step.

Although Labour is riding high in the polls because of a strong economy and the perception that the Government has kept its promises, Dr Cullen does not believe another tax hike is justified to speed up social and economic development plans and assuage the seemingly insatiable demand for extra health spending.

"At the margins, one could achieve some significant improvements, particularly in areas like health and probably tertiary education - and particularly perhaps early childhood education. But Labour certainly won't be going into the election with any proposals to lift income tax rates, or GST rates or company tax rates," Dr Cullen said.

That did not mean that excise duties on tobacco, alcohol and petrol would not rise, as they had in the Coalition's present term.

But if Dr Cullen is not about to "soak the rich" a second time, he defends the extra impost on top income earners.

"The Government was facing a reduction in revenue that would have made it impossible to achieve the core pledges without a serious deterioration in the operating balance and debt position. So we had to generate some increase in revenue.

"We had criticised the previous Government for tax cuts and driving down the quality of provision of public services, so I don't think we had any embarrassment about a modest increase in the tax rate for those with above-average incomes."

Feature: The $1 billion question