Goff defends tax cut plan

Labour leader Phil Goff says tax cuts for middle income earners are possible but are dependent on savings elsewhere.

Prime Minister John Key says Mr Goff's plans are not sustainable and promises he gave in a speech yesterday made him sound like Santa.

Mr Goff yesterday talked about the squeeze on the middle class, saying Labour would focus on improving wages and getting debt down.

Today he told reporters that he was talking about people who didn't get help from the State but were not wealthy enough to pay for everything they need. Increased cost of living, including food and power and stagnant wages, meant they "are really struggling".

Tax cuts were possible but only if they could be paid for.

"For the middle income earners who didn't get a share of the big tax cuts that the higher income earners got, they will be facing absolutely no tax increases, and, if we can crack down on the tax avoiders and dodgers and we can get further revenue from those sources, then down the track they are the people, if there is a chance to give tax relief again, (who) would get it."

Mr Goff said a working group could be set up to find ways of cracking down on avoidance.

Labour was not considering recommendations a previous working group had suggested -- such as land or capital gains tax but another way of raising some money was a top tax rate for people earning over six figures.

"There's not going to be scope for wide-ranging further tax cuts other than in specific areas where I have pointed out, like taking the GST off fresh fruit and vegetables."

Labour would ensure dividends from power companies were used for transmission and generation rather than as a cash cow.

"We will not be using the power dividends as a form of additional taxation."

That would have an impact on prices, he said.

Mr Key said the Government had been trying to lift the burden on New Zealanders but difficult financial times meant people were feeling the pinch.

"Middle New Zealanders, like a lot of New Zealanders, aren't feeling the wealth effect that they felt in the early parts of the 2000s because house prices haven't been rising very much," he told reporters.

"So there are challenges but the Government has been steadily cutting taxes, we've been trying to take the burden off them where ever we can and for the most part there have been quite substantial tax changes for average New Zealanders."

Mr Goff's plans to reinstate payments into the Super Fund plus removing GST from fruit and vegetables would cost $2.25b, he said.

"He says he's going to repay debt faster, he says he's going to cut taxes on middle income New Zealanders. He sounds a bit like Santa Claus but you know has he got any answers? I haven't actually seen any policies that indicate how he would do that."