National's plans for tax cuts will be highly political and take some explaining to voters after six years of tight financial control of the economy by Finance Minister Bill English.
Prime Minister John Key last week hinted tax cuts were on the way - at odds with Mr English, who had previously talked about not enough ''fiscal headroom'' to give a tax break to people on low and modest incomes.
An announcement is expected today, with Mr English saying the cuts would be about $500 million a year.
''We've talked for some time now about moderate tax reductions and that's in the context of a government that's been careful about its spending. We can manage good public services with current taxes or slightly lower, with moderate tax reductions,'' he said on TV3's The Nation.
The talk has now changed from low and medium incomes to low and modest incomes.
It is not the first time Messrs Key and English have been at odds over financial policy. Mr Key has been more prepared to take a risk electorally than the financially-prudent Mr English.
Polson Higgs tax partner Michael Turner yesterday said the tax cut plan was intriguing because of the apparent contradiction between the two men.
''The hard bit will be how they pitch it. This is very political. If they pitch the tax cuts at the high end, the Left will jump all over it.
''If they pitch at the low and modest earners, it becomes very expensive, as it affects everyone.''
New Zealand tax bands are: 10.5% from $0 to $14,000, 17.5% from $14,000 to $48,000, 30% from $48,000 to $70,000; and 33% for $70,000 and above.
One of the options was cutting the $14,000 rate to 9.5%, meaning everyone - including superannuitants and beneficiaries - would pay 9.5% on their first $14,000 of income.
Mr Key hinted the cuts would give people an extra $10 or $20 a week in their pockets but Mr Turner said that was still a large amount of money across all income earners.
If the top tax rate was cut from 33% to 32%, it would affect a small number of income earners but be politically unacceptable.
That also applied to policies suggesting having the first $5000 tax free - it affected everyone, he said.
Another option was extending the lowest band from $0 to $14,000 to $0 to $16,000.
National had shown it was unwilling to provide tax help to people through rebates or increasing Working for Families payments because the ''real tax cost'' jumped up significantly.
Mr English has made much of returning the Crown accounts to surplus and the accounts are expected to return to the black sometime during the 2014-15 financial year. However, an already paper-thin surplus was further trimmed by the Treasury in pre-election updates.
It will go against Mr English's prudent nature to want to promise too much and there is an expectation the tax cuts will not come in until two years of surpluses are guaranteed. That could mean 2016.
Mr Turner said politicians were adept at pushing out deadlines and he would not be surprised if the cuts were delayed.
The options
• Cut the lowest tax rate to 9.5% on the first $14,000 of income, meaning every taxpayer, including superannuitants and beneficiaries, would receive something.
• Lifting the first tax band from $0 to $14,000 to $0 to $16,000, cutting out some of the poorer paid in society.
• Providing rebates or increasing payments through Working for Families seen as unlikely.
