National has unveiled an economic and tax package that gives with one hand and takes with the other.
Party leader John Key revealed a slightly pared down tax cut package that puts more in people's pocket's next April, but offers less than planned.
The cuts are funded by cutting planned increases to Government subsidies for those in KiwiSaver and axing research and development tax credits for businesses.
There is also a reduction in the amount to be spent on infrastructure in the next three years, so that borrowing is reduced.
Mr Key said a worker on the average wage of about $48,000 would be better off by an additional $18 a week above Labour's tax cuts when National's first tranche of cuts kicked in on April 1 next year, if the party is elected.
Incorporating Labour's October 1 cuts, the same worker would be $47 better off by April 1, 2011.
The package outlined by Mr Key included movements in both the thresholds that different rates start at, and drops in the actual rates themselves.
It also included a tax rebate of $10 a week for taxpayers earning between $24,000 and $50,000 who do not receive anything from Working for Families.
It is estimated 600,000 people would qualify for the rebate.
Mr Key said National had scaled back its tax cuts plan by $2 billion in the face of a decade of forecast budget deficits.
It was estimated the tax cuts would now cost $5.7 billion up to 2011/2012.
The changes to KiwiSaver as well as dropping the research and development subsidy would save $5.9 billion over the same period.
Mr Key said the worse than expected economic figures released on Monday meant National had been less generous with the top tax rate and the lower scales as well.
"It had been our intention to take the top personal rate down much faster," he said.
Under the proposals, the top rate will reduce from 39 cents to 38 cents.
Mr Key said National had also intended taking the 21 cent rate down more quickly to 20 cents. This was now not happening until 2011.
National wanted a simple three-tier tax structure with the highest rate at 33 percent for those earning over $50,000.
Funding the cuts mainly through changes to KiwiSaver meant there would be no increase in Government debt.
Under the plan, the KiwiSaver scheme would have employees contributing 2 percent of their income and the Government subsidising an equivalent amount, but the Government subsidy would not rise to 4 percent.
Mr Key said National would also remove the tax credit to the employer subsidy and this would remain at 2 percent meaning it would have to come from the employer's pocket.
Labour had planned to increase the compulsory employer subsidy up to 4 percent, subsidising half of that. One in five workers (800,000) are signed up to the scheme.
Mr Key said the scheme designed by Labour was only affordable in good economic conditions and the changes would make it more sustainable and enduring.
Finance Minister Michael Cullen said National's plans would destroy KiwiSaver.
"National's first instinct is to destroy a programme that will help promote growth," Dr Cullen said.
The current crisis in international finance markets meant New Zealanders had to save more not less, he said.
National would attack savings and investment in research, all for a poorly designed tax package that delivered nothing to 370,000 on Working for Families and less than planned under Labour for the lowest and highest earners, Dr Cullen said.
Minor parties and trade unions found nothing to praise in National's tax cuts policy.
* The Greens described it as "a fake free lunch" which would increase debt, widen the gap between rich and poor and suck resources out of research and science.
"Most of the benefit will be felt by those on above average incomes," said co-leaders Jeanette Fitzsimons and Russel Norman.
"Even a one cent drop in the top rate is a big windfall for those earning half a million a year. Meanwhile families earning less than $14,000 will get nothing."
* New Zealand First urged people to "look behind the glossy headlines" for the real agenda.
"National's attempts to focus all attention on its `mine's bigger than yours' tax package is an exercise in sophistry," said party leader Winston Peters.
"Today's announcement, like some unwanted Christmas present, is just 1990s policies re-wrapped in the shiny, smiley parcel that is John Key."
* Progressive Party leader Jim Anderton said it was anti-family and anti-business.
"You get more if you don't have children and almost nothing if you do," he said.
"In tight financial conditions globally, the priority for tax relief should be for the poorest and for economic development. National has done the opposite."
* United Future leader Peter Dunne, who is minister of revenue, said it was complicated and would be difficult to administer.
"Superannuitants and low income earners are the big losers," he said.
"Introducing more tax thresholds and a top rate of 37 percent is complex, not especially fair and involves cutting tax rebates for research and development and fiddling with the highly successful KiwiSaver scheme."
* ACT said John Key had failed to provide any economic leadership or direction.
"I can see now why John Key doesn't want Sir Roger Douglas in his cabinet," said party leader Rodney Hide.
"The man he sees eye-to-eye with is (finance minister) Michael Cullen.
"What is needed is a recovery package that includes capping government expenditure, slashing red tape, and an immediate abolition of Cullen's 39 cent envy tax."
Other reaction included:
* The Council of Trade Unions said the policy did not address New Zealand's low wage problem and significantly discouraged long term savings.
"The language of their announcement is pitched at those on the average wage, but two-thirds of workers earn less than this," CTU economist Peter Conway said.
"John Key's language around belt tightening in the public service will also send a chill down the spine of every public servant in the country. National gutted public services in the 1990s and they look set to do so again."
* The Public Service Association said there was no way National could cut taxes so deeply without cutting jobs and services as well.
"For families throughout New Zealand, this means fewer public services in their community and fewer jobs in their local economy as public service workers are laid off," said PSA secretary Brenda Pilott.
* The Engineering, Printing and Manufacturing union, the biggest in the country, said the package was reckless short term thinking.
"If this package were in place today, the CEO of Telecom would be more than $500 a week better off while a family on a single average wage of $44,000 a year and receiving Working for Families would actually pay more tax and at the same time lose their employer's contribution to their KiwiSaver scheme," said EPMU national secretary Andrew Little.
- By Ian Llewellyn of NZPA
