Tax Credits

tara747

zagfles wrote: »

You can play semantic games, but whether you "paid" or "subsidised" the point was to illustrate the (generally) one way flow of subsidy, err I mean payment for "what is necessary to bring them up..." from parent to child.

For people who have children it generally cancels out, their parents subsidised them, err, sorry "paid what was necessary to bring them up and provide the best life they could", and they did the same for their children.

For people who don't have children, they received "what was necessary to bring them up and provide the best life they could" but didn't give it.

This isn't a criticism of them, or even something to feel guilty about. Especially as some would like to have children but can't. Just something to think about before whining that they're hard done by financially.

We are giving it. To pay for other people's children.

zagfles

CLAPTON wrote: »

whilst arguing about sematics is in general a waste of time, in the context of how and to whom benefits should be paid, there is a big diffeence between the taxpayer subsidising my children and me paying to bring them up

Of course there is. But it's it's not an either/or, is it? Unless you privately educated them and they never saw a GP etc.

zagfles

tara747 wrote: »

Ye gods! Do childfree people get some kind of extra tax breaks? Why am I only hearing about this now??

Whoosh....

What do you mean, you subsidise your children? Surely having children means that you pay the costs of bringing them up?

Having a child is a choice. Having a dog, a horse, an expensive car - these are all choices. You pay for the cost of your pet/car/hobby/children.

Will your car, dog or horse be paying the taxes in 20-60 years time which will pay your pension, or provide the labour the country needs?

What about parents who have never paid any taxes? What are they contributing?

The next generation of taxpayers. Or at least the possibility. What are childless people who never paid any taxes contributing?

zagfles

tara747 wrote: »

We are giving it. To pay for other people's children.

No you're not. You're repaying the state for the taxpayer subsidy you received as a child. But that was just one part of the subsidy you got. The rest came from your parents. So you're a net taker unless you return that subsidy[1] too, or pay it to someone else.

I'm of course taking averages, and "you" as a plural. Some childless people overall won't be net takers eg because they have a very well paid job and return more than their total subsidy through taxation, and some may financially support their parents in old age, or contribute loads to charity etc.

[1] or whatever other way you want to describe it

lisyloo

or whatever other way you want to describe it

Well it interesting that you describe childless people as primarily takers and then add "unless".
I would have thought that in general the absence of children allows people to spend more time on their career and that on average people who do not have the restriction of childcare would be contributing more through their careers.

So however you describe it is indeed very telling about your attitude.

I'd change "you're a net taker unless" to "you're on average a net giver financially even though you're not directly contributing to bring up the next generation through direct childcare UNLESS".

So how you describe it does make a difference to how your words are interpreted.

P.S. I am not putting a higher value on EITHER caring for children or contributing financially. Clearly both are important, but my logic would be that on average the childless contribute more financiallly through the taxation system and those with children contribute more through direct costs and direct time.

setmefree2

Zagles I take your point but have lost track of where you stand on this issue. Going back to the bigger picture - which is the uncontrollable size of the welfare budget. In the seven years since the economic crisis began, the UK’s national debt has risen by more than £900 billion – more than doubling.

Why? It would seem the answer is the soaring welfare budget, which now funds widespread under-employment. More than half of households now take more money from the Government than they contribute leaving a minority of not overly rich taxpayers – working people as well – to fund the bill.

Surely you must agree that generous tax credits came about because Gordon Brown (however well intended) extravagantly overstretched the system and turned support away from being a safety net to a way of life for many?

The original system cost £4 billion in its first full year, reaching £30 billion in 2015. As former Labour Chancellor Alistair Darling has said tax credits were "subsidising lower wages in a way that was never intended". In contrast only 2 percent of welfare spending nowadays is given to those out of work.

Tax credits need to be reformed for numerous reasons not only because they are complicated and prone to error but because they encourage employers to keep wages low because they know the state will top up their wages bill; in effect they are being given a license to pay less. More importantly tax credits discourage recipients from working harder and longer hours for more pay so productivity and aspiration suffer. An example of this is a single parent with three children who works 16 hours a week on the minimum wage – earning them roughly £5,400 per year. Adding together child tax credit, working tax credit and support for childcare, he/she could receive an additional £23,885 a year. They would effectively receive around 80 per cent of their income via benefits. However there is little incentive to switch to a job working more than 16 hours a week. The tax credits drop sharply; net income increases more slowly and recipients can face a high marginal tax rate.

To put it into perspective in 2010, a staggering nine in ten families with children were eligible for tax credits, the last coalition government reduced it down to six in ten and with the current reforms it is hoped to reduce this further to five in ten. As has been discussed tax credits are not just paid to the lower percentages of income earners but right up the scale to the middle classes. This can’t be right.

So what's the alternative to cutting tax credits? Cutting the NHS, cutting working people’s pay by putting up taxes, or borrowing more and burdening our children with yet more debt.

lisyloo

Just playing devils advocate for a minute

However there is little incentive to switch to a job working more than 16 hours a week.

What about the social issue of parents staying home to bring up their own children (no particular axe to grind, just debating).
If there aren't enough jobs to go around then doesn't it make sense to incentivise those people with children to stay home and let childless people take the work? I'm assuming we think parents spending time with their own children is a good thing.

I understand the budgetary constraints but if we take away tax credits it won't make there be more jobs to go around.
Why have single parents with 3 kids working all the hours god sends and other people getting depressed because they have nothing to do.
i.e. I'm asking what about the social aspects?

I don't think it's constructed perfectly and I do think there are some unintended consequences, but I'm not 100% convince that it's not a good idea to incentivise some people to not go to work on the assumption that there jsut isn't enough work for everyone.

zagfles

lisyloo wrote: »

Well it interesting that you describe childless people as primarily takers and then add "unless".
I would have thought that in general the absence of children allows people to spend more time on their career and that on average people who do not have the restriction of childcare would be contributing more through their careers.

Possibly, although there was a study which showed that fathers earn on average 8% more than men of the same age who aren't fathers. Presumably because they need the extra money.

So however you describe it is indeed very telling about your attitude.

The "attiitude" is only directed against those too thick to realise that the reason their taxes pay for "other peoples' children" is because when they were a child, other peoples' taxes paid for them, and when they become a pensioner they'll likely be subsidised by those children they were whinging about having to pay for

I'd change "you're a net taker unless" to "you're on average a net giver financially even though you're not directly contributing to bring up the next generation through direct childcare UNLESS".

So how you describe it does make a difference to how your words are interpreted.

P.S. I am not putting a higher value on EITHER caring for children or contributing financially. Clearly both are important, but my logic would be that on average the childless contribute more financiallly through the taxation system and those with children contribute more through direct costs and direct time.

Taxation wise I wouldn't have thought there's a lot in it. Some yes but not a lot. Also remember the tax system (as opposed to benefits) is skewed against parents.

As an example, many years ago a friend of mine was on £30k, his wife was on about £10k. They had their first child. His wife gave up work to look after the baby, at about the same time he volunteered for a shift/on-call rota plus overtime to make up for the loss of his wife's income. He got an extra £10k or so, so their joint income was still £40k.

But thanks to the wonderful "independant taxation" system we have in this country, they paid a lot more tax on his £40k than they were on their joint £40k before they had the baby.

setmefree2

The economist Arthur Laffer has said: “If you pay people to be poor, you will get more and more poor people.” He was referring specifically to the benefit-dependent underclass held in permanent poverty by the welfare system that created perverse disincentives to work. But the same principle applies to tax credits: if you pay people to be low-paid, you will get more and more low-paid people. Instead of low-wage jobs simply being an entry point to employment, or a temporary stop-gap at particular stages of life, they become the permanent condition of a whole tranche of the population.

http://www.telegraph.co.uk/news/politics/georgeosborne/11967860/Theres-a-strong-moral-case-against-tax-credits-why-didnt-George-Osborne-make-it.html

setmefree2

lisyloo wrote: »

What about the social issue of parents staying home to bring up their own children (no particular axe to grind, just debating).
If there aren't enough jobs to go around then doesn't it make sense to incentivise those people with children to stay home and let childless people take the work? I'm assuming we think parents spending time with their own children is a good thing.

Tony (& Cherie) Blair & Gordon Brown never thought SAHMs were a good thing. Whether this was for economic reasons - more workers makes for larger economies/ GDP - or ideological reasons - they just believed women should work - I never quite understood.

70% of tax credit recipients are women.