KEY POINTS:
Finance minister Michael Cullen stepped up the war of words over tax cuts today accusing National Leader John Key of wanting to take money from working families to pay for tax cuts for "his rich mates".
The attack came after Mr Key said National would roll back part of the Government's Working for Families package to help fund tax cuts if it wins the next election.
Dr Cullen said: "Mr Key is saying 'well lets take some money off ordinary, average Kiwi families and spread it across the board to everybody including those that are very well off'.
"I find it quite extraordinary that this would be the kind of policy they are now running on and we're very happy to run on the opposite."
The $550m boost to state pay-outs, announced before the last election, has been criticised by National for pushing welfare out to higher income earners and discouraging extra work through the scheme's high marginal tax rates.
Under the extended scheme, working families with one child earning up to $71,920 qualify, as do people earning up to $139,000 with five children.
But Mr Key yesterday said he saw no reason why such income earners should receive a state handout.
"It's always been my view that it has never been a well-designed system. It was never the intention of Working for Families to reach so far up the income scale," he told the Press.
"That was really a reaction to National's tax plan rather than good design.
"So a redesign of that system which has an element of tax cuts substituted for Working for Families has got some merit to it."
'Immensely worse off'
Prime Minister Helen Clark today said if National was proposing taking money from Working for Families and spreading it thinly in tax cuts, then some people would be "immensely worse off".
She said: "I think that's terrible for families, because as we know Working for Families extends to about 70 per cent of families with children. That tax cut for them is very badly needed."
Even middle income families were quite hard pressed at the moment, particularly due to high housing costs, Miss Clark said.
National has been wrestling with how to deliver tax cuts against a backdrop of a slower economy than in 2005 and strong inflation.
A spokesman for Mr Key today downplayed his comments saying they were nothing new.
He said tax cuts were a fairer mechanism as single people with no children would receive something.
Finance Minister Michael Cullen said today the suggestion that the extension was poor government spending was "bizarre".
"That's extraordinary because we had a situation we inherited where increasing numbers of children were living in poverty and if you are going to do something about that you actually have to transfer income into families with children," he said on Radio New Zealand.
Dr Cullen said National's claim that Working for Families was driving inflation was ridiculous when National's 2005 election tax cuts package would have been far more inflationary.
- NZPA
