Tax Credits

CLAPTON

kinger101 wrote: »

I agree that you're not likely to get 4% a year indefinitely, but at the same time, who'd have had everything in just FTSE 100?

I don't take the view that you should be 100% out of equities at 65, given there will be plenty of stock market cycles within your remaining life. But I'm not a fan of FTSE 100 funds in particular. If you want dividend stocks, pick a basket of your own. If you want growth, go for FTSE 250 or funds targeting smaller companies.

I don't disagree with you but the context was the potential 'pension' return of 40k pa on a fund of 1 million.

In my view, unrealistic for a guaranteed risk free index linked income.

kinger101

cells wrote: »

higher pay doesn't need to mean employers paying more it could mean the government taking less

So for example if the tax credit cuts are saving £5 Billion that probably enough to up the zero tax band by £1500 (and down the higher rate band by an equivalent amount so higher rate payers don't benefit)

Actually, it does mean employers paying more. Increasing the zero band by £1,500, at best, increases someone's annual salary by £300. That's about £1.15 a day (based of 5 day week) or 14 pence an hour (based on 8 hour day). A tiny fraction of the increase proposed for the new living wage.

If it's funded out of slashing tax credits, it will be cost neutral, but in effect, it's barely noticeable to anyone except those who lost their tax credits.

In short, we can only reduce our in-work benefits bill by getting employers to pay more. We have one of the lowest corporation tax rates in the developed world, so it's not as if we have a country that's unfriendly to business.

Getting rid of tax credits would also mean we're no longer subsidizing thousands of self-employed people who've decided to set up a non-viable lifestyle businesses, e.g., doing doggy perms, nail bars, cat sitting or some other nonsense. A bit of the saving could be used to nurture viable self-employed businesses instead (e.g. support with accounts etc).

kinger101

CLAPTON wrote: »

I don't disagree with you but the context was the potential 'pension' return of 40k pa on a fund of 1 million.

In my view, unrealistic for a guaranteed risk free index linked income.

Yes, I wouldn't expect it to be index linked either, but I don't think it's an unwise initial withdrawal rate for someone wanting to be more active in their early retirement than later, and could get by on less if needed. It certainly needs reviewing annually.

michaels

kinger101 wrote: »

Not really. You think you're the only one playing the system? A company has a duty to it's shareholders to pay pi5s poor wages if they can get them topped up by tax credits. Tax credits are nothing more than state aid.

But surely employers will pay p*ss poor wages even if the govt is not giving top ups to their employees if they can get the staff, and if the employees have no choice but to work whatever wage is offered then why would they not work without tax credits, they would be even poorer of course but what other choice would they have?

kinger101

michaels wrote: »

But surely employers will pay p*ss poor wages even if the govt is not giving top ups to their employees if they can get the staff, and if the employees have no choice but to work whatever wage is offered then why would they not work without tax credits, they would be even poorer of course but what other choice would they have?

Most employers would of course pay as little as possible, which is why increasing the minimum wage is the way forward if we want to increase low pay. A worker then doesn't decide to work no more than 16/24/30 hours because of loss of benefits. They get to keep more of their income.

In any case, this fixation on losing benefits for working more hours is not good. Most people would rightly agree that an unemployed person should be refused benefits if they refuse work. I don't see why a different standard should be applied to someone in work being offered additional hours. The point about working more isn't your effective hourly rate after top-ups, it about becoming less reliant on the state.

Where would be be if the higher rate tax payers who contribute the overwhelming majority of the countries income tax decided to cut their hours just because their income tax rate doubled?

Part of the problem with the tax credit system as well as it was bought in with good intentions to reduce child poverty. But 60% of median income is not an actually a meaningful measure of poverty. It should have focused only on absolute poverty.

Shakethedisease

They'll either have to u-turn completely.. or else do what they should of done and reduce tax credits in line with raising the minimum wage in increments over the next few years.

Cutting tax credits as they are proposed is going to be political suicide. Especially running alongside an EU referendum campaign with all the divisions along Tory ranks that will bring. They have to realise that when they were talking about 'reducing the benefits bill'.. there were millions of people that didn't think they meant tax credits. They thought it was JSA or just 'whatever'.

The Tories are getting twitchy. And things were going so well too.

gadgetmind

michaels wrote: »

But surely employers will pay p*ss poor wages even if the govt is not giving top ups to their employees if they can get the staff

Big if. The pool of unemployed people is now very small, and those left unemployed are in many cases unemployed for a very good reason. This leaves employers having to compete for those who actually want to work and who can be reasonably productive, so we'll see pay growth across the board.

Of course, a rising minimum wage does mean that those currently earning just above this will find themselves "caught up" by it, and may be one category of people who don't share in this growth.

gadgetmind

Shakethedisease wrote: »

They have to realise that when they were talking about 'reducing the benefits bill'.. there were millions of people that didn't think they meant tax credits. They thought it was JSA or just 'whatever'.

I took it to mean getting people to stand on their own two feet, no matter where in the income bracket they stand.

BTW, Mrs Damp Eyes on TV complaining that she was going to have to pax tax just like everyone else, and really hadn't expected it, does anyone know the system well enough to take a stab at what she's earning?

(I don't know said system as I've never claimed any benefit other than student grant, and I'm now feeling guilty about that!)

Moby

Shakethedisease wrote: »

They'll either have to u-turn completely.. or else do what they should of done and reduce tax credits in line with raising the minimum wage in increments over the next few years.

Cutting tax credits as they are proposed is going to be political suicide. Especially running alongside an EU referendum campaign with all the divisions along Tory ranks that will bring. They have to realise that when they were talking about 'reducing the benefits bill'.. there were millions of people that didn't think they meant tax credits. They thought it was JSA or just 'whatever'.

The Tories are getting twitchy. And things were going so well too.

Problems will start to build up for them in the next year or so. The next recession is around the corner. The EU referendum is going to be close and contentious and the spending review is rumoured to be likely to result in 25% reductions in unprotected dept budgets. Add to that the tax credit policy which is being introduced in such a ham fisted way, continual speculation over porky daves succession.........politics is getting interesting again!

Generali

Moby wrote: »

Problems will start to build up for them in the next year or so. The next recession is around the corner. The EU referendum is going to be close and contentious and the spending review is rumoured to be likely to result in 25% reductions in unprotected dept budgets. Add to that the tax credit policy which is being introduced in such a ham fisted way, continual speculation over porky daves succession.........politics is getting interesting again!

Rather a shame for Labour that they have such an utterly incompetent leadership team that is fundamentally unable to decide on a policy that lasts for more than a few weeks let alone actually take advantage of any of this 'ham fisted' stuff.