The National Party has outlined its much-anticipated tax policy, which includes a $47 a week tax cut for those on the average wage of about $45,000 a year.
National leader John Key gave details of the tax package, which includes new tax rates and thresholds, in a speech to party faithful at North Harbour Stadium in Auckland on Wednesday.
National will fund its tax cut programme through changes to the KiwiSaver scheme, and scrapping the Research and Development tax credit.
John Key says a National government would reduce the minimum employer contribution to KiwiSaver and remove the tax credit currently paid to employers. It would also repeal recent legislation which it says discriminates against some employers who cannot afford to join the scheme.
Mr Key says National believes a 2% worker contribution, matched by a 2% employer contribution is fair. But he says the party disagrees with Labour's plan to ramp that up over the next three years.
The tax cuts incorporate the Labour-led Government's cuts which came into effect on 1 October. Most of National's cut would be introduced in April 2009, while the full reduction would be distributed by 2011.
New tax rates
National would would introduce new tax rates and thresholds from April 2009.
There would be a tax rate of 12.5% for those earning up to to $14,000, and a 21% rate for income between $14,001 and $48,000.
A 33% tax rate would apply to income between $48,001 and $70,000.
For those earning more than $70,000 the tax rate would be 38%.
From April 2010, the minimum income level at which a 33% tax rate would apply would be raised to $50,001, while the top tax rate would be lowered to 37%.
From April 2011 National would lower the 21% tax rate to 20%.
Mr Key says under a National government, about 80% of taxpayers will be paying no more than 20c tax in the dollar for every additional dollar they earn.
Under the Labour Party's tax cut programme someone on the average wage would get a tax cut of $32 a week by 2011.
Many worse off, says Cullen
Labour Party finance spokesperson Michael Cullen says many low income earners will be worse off under National's tax cuts than under Labour's tax cut programme.
Dr Cullen says the package outlined by Mr Key will do nothing for the economy.
"This is not an economic package at all, in fact its quite the reverse of that. All it is, is a very poorly designed tax package dressed up as an economic package."
Green Party co-leader Russel Norman said it would have been more responsible not to pledge tax cuts, given New Zealand's current fiscal position.
Dr Norman says it is disappointing that savings to fund the programme are coming from incentives for research and development, and from incentives for savings in KiwiSaver.
Independent earner rebate
National would introduce an independent earner rebate, which would apply to people earning between $24,000 and $50,000 a year who are not receiving a Working for Families payment, superannuation or a benefit.
The rebate would be $10 a week from April 2009 in the first year and $15 a week in subsequent years, and its value reduces as incomes increase above $44,000.
National's policy documents say official statistics suggest more than half those earning between $24,000 and $48,000 a year will be eligible for the rebate.
National says its programme will save $283 million in government spending.
John Key reiterated that the programme would not be funded by additional borrowing or cuts to core public services.
He says the party has ensured it is appropriate for the current economic conditions.