JOHN Howard has promised to return $34 billion to taxpayers in one of the boldest starts to an election campaign in Australia's political history.
Firing the first shot in what promises to be a Coalition "shock and awe" offensive to destroy Labor's bid for office before it gets started, the Prime Minister and Treasurer Peter Costello outlined a tax policy that would boost family incomes by up to $50 a week.
The sweeping reforms – which Mr Costello insisted were fully funded – would set a new tax course for Australia until 2013 if the Coalition was returned to office at the November 24 election.
Labor appeared to be caught out by the announcement, with Opposition Leader Kevin Rudd saying that, while he supported tax cuts, Labor had yet to decide if it would match the Coalition's package.
The Coalition's tax proposal promises, within five years, an end to tax for anyone earning up to $20,000 and a top marginal tax rate of 35 per cent for 98 per cent of taxpayers.
The reforms are also designed to spearhead an expected series of policies rolled out over the next six weeks to directly appeal to those missing out on national prosperity.
Mr Costello used an impressive mid-year economic review – showing growth will increase to 4.25 per cent, half a per cent more than budget forecasts – to back his claim the Commonwealth could afford the new tax regime.
But the gloss of the tax announcement was smudged when Mr Howard was unable to state the official interest rate.
When asked to do so by Channel Nine's A Current Affair, Mr Howard said the interest rate was 6.25 per cent.
The rate was raised from 6.25 per cent to 6.5 per cent in August – an increase of about $50 a month for a borrower who was paying back a typical $300,000 loan.
Mr Rudd answered the same question correctly.
The Prime Minister and his Treasurer last month attacked the Opposition Leader for having stumbled and answered incorrectly when asked at a press conference to name the tax thresholds. The pair claimed his answer showed Mr Rudd "didn't understand the barest fundamentals" of the Australian taxation system.
Australia decides
With the election campaign just beginning, Australian Prime Minister John Howard has promised AU$34 billion in personal income tax cuts over the next three years.  That is on top of $31.5 billion announced in May, and $36.7 billion announced in 2006.

The new tax cuts are based on new projections for growth in the Australian economy.  The Treasury estimates that the economy will expand by 4.25% in the 12 months to June 2008, up from growth of 3.75% predicted in May.

The Government has challenged the Labor opposition to announce their tax policy immediately. 

"The biggest, boldest tax plan that we've seen in a long time is presented yesterday, it deals with participation, competitiveness, building capacity in the Australian economy, and what does Kevin Rudd say? Nothing," treasurer Peter Costello said. "He better have an answer today."

Costello described the government tax policy as "very responsible" and said Rudd was a "Nothing Man" because he has not revealed Labor's tax policy.

The Shadow Treasurer, Wayne Swan, replied "The only responsible course of action here is to study the detail. We've said we'll put out all our policies well before the election and we'll do that".

"But in terms of what the Government's put forward, we will take our time to study the detail. That's the only responsible and reasonable thing to do."

Economists from Access Economics, the ANZ Bank, HSBC and Macquarie Bank noted that the tax cuts will boost demand at a time when the Reserve Bank is trying to slow the economy.  The Reserve Bank has been raising interest rates to keep the inflation rate within its target range.  Households with substantial mortgages could end up worse off.

Rudd has said the Opposition will reveal its tax policy in its own time - mimicking John Howard's approach when he was Opposition Leader in 1996.