Tax credits... an ideal solution or

Wookster

a major complication?

I can't understand why there are tax credits? Why not just have lower taxes and a simpler, easier to administer tax system?

James_Lahey

That's the sort of logical, sensible and rational idealism that has no place in the world of tax credits!

I for one look forward to spending 3 hours on hold listening to a loop of some terrible music so I can let them know my childcare or working hours have changed slightly. Waiting for yet another envelope stuffed with half a ream of mainly unintelligible paperwork is the icing on the cake (albeit very handy for the guinea pigs/rabbits/hamsters after shredding.)

jamesmorgan

The key reason is that whilst it is described as a tax credit (ie an offset against tax paid), for many people they receive more in tax credits than they pay in tax. A couple with 4 children will receive about £16K in CTC and WTC. You have to earn more than £50K before you pay that much income tax. If the income tax system allowed negative payments (ie it paid you if you earned less than your tax code) then it could all be handled by PAYE, however, in the absence of this a separate system was necessary.

The other key issue is that the whole system is unaffordable so it needs to become highly targeted. This involves a set of complex rules and very high withdrawal rates. The net result is high marginal tax rates (at least 70%) which brings a whole set of undesired consequences.

Personally I would prefer a solution along the lines of a Citizens Income (http://www.citizensincome.org/). Failing that a system of transferable tax allowances (including from children).

drc

Basically a catch 22 situation invented by Labour which has increased the cost of living and ensured dependant voting base.

Labour's strategy;

- Increase the cost of living so much (especially housing by not building any and getting everyone to BTL) that nobody can survive on most wages.

- Because most people are no longer paid enough to live, Labour supplemented this income with tax credits (and housing benefit).

- Companies realise that they do not need to increase wages as the taxpayer will make up the shortfall (via tax credits and housing benefit) and many people will work part time as their income is supplemented by aforementioned benefits, so no point in working full time.

- Tax credits and housing benefits push up the cost of living for EVERYONE as those not claiming benefits now have to compete with the spending power of benefits claimants who have shortfall made up from benefits.

- Cost of living goes up because of artificial wealth which results in a need for a rise in tax credits and housing benefits so those on benefits can remain in work/home and compete with the same spending power as those who do not receive benefits.

Labour basically acted like a drug dealer, forcing people to get hooked on drugs (benefits) which they are now dependant on. The Tories are trying to wean them off but this is resulting in the country flat-lining and a lot of nasty cold turkey as all these people require their "fix" and the nasty Tories are trying to force them to come off it.

Fella

drc wrote: »

Basically a catch 22 situation invented by Labour which has increased the cost of living and ensured dependant voting base.

Labour's strategy;

- Increase the cost of living so much (especially housing by not building any and getting everyone to BTL) that nobody can survive on most wages.

- Because most people are no longer paid enough to live, Labour supplemented this income with tax credits (and housing benefit).

- Companies realise that they do not need to increase wages as the taxpayer will make up the shortfall (via tax credits and housing benefit) and many people will work part time as their income is supplemented by aforementioned benefits, so no point in working full time.

- Tax credits and housing benefits push up the cost of living for EVERYONE as those not claiming benefits now have to compete with the spending power of benefits claimants who have shortfall made up from benefits.

- Cost of living goes up because of artificial wealth which results in a need for a rise in tax credits and housing benefits so those on benefits can remain in work/home and compete with the same spending power as those who do not receive benefits.

Labour basically acted like a drug dealer, forcing people to get hooked on drugs (benefits) which they are now dependant on. The Tories are trying to wean them off but this is resulting in the country flat-lining and a lot of nasty cold turkey as all these people require their "fix" and the nasty Tories are trying to force them to come off it.

The other part of Labour's scheme was to open the floodgates to immigration in order to provide a supply of cheap labour who would be prepared to take low-paying jobs. This was necessary because most people in the UK would no longer even consider taking a job that paid the same or only slightly more than what they could get in benefits for doing absolutely nothing.

There were quite a few people unhappy about this, but that was easily solved by calling them racists.