Middle and high income earners who are not in KiwiSaver would be the big winners out of National's tax cut package.

But low income families with children, and people in the KiwiSaver scheme at all income levels, would be better off under Labour.

National's proposed changes to KiwiSaver, scaling back the compulsory employer contribution from 4 per cent to 2 per cent so that it can axe the employers' tax credit for the savings scheme, make it clear that there is no free lunch in the tax-cutting equation. The money has to come from somewhere.

But the equation is uncertain because it depends on how employers respond. If they use the 2 per cent savings that National is giving them to raise their workers' wages more than they would have otherwise, then even those in KiwiSaver could be better off under National.

The Herald's calculations start with the median household income of $55,976 for the year to June 2007, scaled up to $57,935 ($1114 a week) to include the average wage increase up to June 2008.

An individual earning that amount and living alone took home $830 a week before the first round of Labour's tax cuts took effect on October 1.

His or her take-home pay would rise by April 2011 to $862 under Labour or $876 under National - net gains of $32 a week under Labour or $47 (allowing for rounding) with National.

If they were in KiwiSaver, such average earners would also get taxpayer contributions towards their retirement savings of $20 a week under either party.

Under Labour, they would also get a compulsory contribution from their employers rising from 1 per cent of their gross income ($11 a week) now to 4 per cent ($45) by 2011. Adding that $34 a week gain from their employers to their tax cuts of $32 makes them a total of $66 a week better off by 2011 under Labour - assuming that their employers don't scale back their wage rises to pay for their KiwiSaver contributions.

Under National, their compulsory employer contribution would rise only to 2 per cent of their gross income, or from $11 to $22 a week. Adding that $11 gain to their $47 tax cuts gives them a net gain under National of $58 a week, slightly less than under Labour.

Similar calculations show that individuals who are not in KiwiSaver would be better off under National at all income levels. At middle and upper incomes this is because National would cut the standard tax rate from 21 per cent to 20 per cent and the top rate from 39 per cent to 37 per cent.

At low incomes it's because of National's proposed independent earner rebate of $15 a week for people who don't receive Working for Families payments or other benefits.

Families with children would also be better off under National at middle and upper incomes if they're not in KiwiSaver.

However, families with children on half the median household income would be $7 a week worse off under National than under Labour, even if they're not in KiwiSaver, because their Working for Families entitlements would exclude them from the independent earner rebate. They would also suffer because National would bring in the standard tax rate from a lower income ($14,000) than Labour ($20,000).

THE FIGURES
Net gains including KiwiSaver subsidies*
April 2008 to April 2011, $ per week

Household income Labour National
Individual
$557, not in KiwiSaver + $22 + $30
$557, in KiwiSaver + $38 + $27
$1114, not in KiwiSaver + $32 + $47
$1114, in KiwiSaver + $66 + $58
$2228, not in KiwiSaver + $55 + $76
$2228, in KiwiSaver + $122 + $98

Couple with 2 children
$557, 1 earner, not in KiwiSaver + $29 + $22
$557, 1 earner, in KiwiSaver + $46 + $19
$1114, 2 earners, not in KiwiSaver + $59 + $67
$1114, 2 earners, both in KiwiSaver + $93 + $74
$2228, 2 earners, not in KiwiSaver + $64 + $93
$2228, 2 earners, both in KiwiSaver + $131 + $115

*Includes compulsory employer and taxpayer contributions. Incomes are the median household income ($1114 pw), half that and twice that.
Source: Herald calculations.