Am I being thick? What on earth is the point of 'tax credits'?

Yes Ivy

And credits pay pther benefits too- for example some of the disability ones are delviered that way.

It won't ever be as simple as just doing tax releif, you'd dtill ahev to set upa a dept for different benefits to replace those covered as well. PITA

and I never realised that about thomas but my cousins lad loves him and knows all the names and number of every single engine it gives him a lot of comfort when on holiday and they take the video player and thomas tapes

tax credits were what came after working family tax credit

working family tax credit came in septemebr 1999 and meant for the first itme that if you came o benifit and went into work you could have your wages topped up if they were low and you could also have 70% of your childcare paid for if you were a single mum.

This was a great incentive to get single mothers back itno work as they had always complained if they worked they were worse of than claiming unemployemtn benifit as they needed to pay for childcare and petrol cost.

The working families tac credit was based on 6 weeks wage slips and claimed every 6 months and paid through your wage slip by your employeer.

You coudl as a single mother also claim the married mans tax allowence - so you got an extra £500 pounds per year tax relief

Then the scraped the working tax credits and made them tax credits and child tax credits and scraped the working mans tax releif or £500 per year.

Your wages are made up to a nationla minum for the amount of epole in your hosuehold.

So if you earn £6500 a year you will of course not pay any income tax, onyl NI contributions, and you will have your tax credits and child tax credit topped up to the maximum

try telling someone working part time with child care that they should just get tax releif - I don't think they will agree with your simplist view op

problem with raising the minimum wage to a realistic one for living is (imo) not that they can't afford to pay those workers more, but everyone elses wages would have to go up as well.

For example I was paid £5.50hr when I worked nights a few years ago (was the minimum wage then), I was an unqualified care worker, the night manager was on around £8hr

So - lets say they put the minimum wage up to £8hr - so £16.5k (approx) before tax per year (based on a 40hr week, I did 28 1/2) . They can't really leave the night managers wages at £8hr, well they could but if I were the qualified care worker, managing all the night staff I wouldn't be happy to find that my unqualified "juniors" were earning exactly the same as me.

So it's like a knock on effect

Agree twinset that was the point I was making earlier!

It just seems very odd to me how people on above average wages are seen to be in need of state help to meet their living costs. I am not questioning that need but saying something has got out of hand with the cost of living and I wonder if tax credits have been a factor in that.

The whole administration of tax and benefits is nightmarishly complex and not integrated.

In essence, tax credits are a bridge between the tax system and the benefits system. I agree there are many ways of simplifying the system but it would cost a lot and take a lot of time to simplify, so successive administrations have just ducked the issue.

I hold my hand up to being pretty ignorant about economics but it just seems very odd that we the tax payer subsidise low wages. People say big businesses can't afford to pay the wages, well my experience if big business says something different. But can we the tax payer afford to keep footing the bill? I worked in a school that could not afford to pay it's staff. Quite a few if us did not draw a full salary. It makes me mad to think we did this so the public pot could be stretched further so multi millionaires if not billionaires could under pay their staff. I have no objection to taxes going to support those who need it, in fact I would happily pay more tax. But not so that fatcats can get fatter.

But as I said I know nothing and could be wrong.

skihorse - how is that a con? The company is acting in the interests of shareholders - I wouldn't EXPECT the workers to get any benefits from it. Except the workers outsourced to I suppose who will have better jobs as a result.

Anyways.

Tax credits are just benefits you don't have to go the job centre for - I don't see any advantage in diffentiating between money the state gives you.

We need to let go of our attachment to the whole tax and benefits system. Start with a blank piece of paper, say the state need X billion a year, so we need to tax everyone X per cent. Then actually MAKE the arguments for progressive taxation, CGT etc. and measure that you actually get the results you expect from those variations.

Well the reason tehy do it is obvious

It rewards people to work; thereby ensuring that people need childcare.... childcarers get a job and pay tax, possibly even needing chidlcare themselves.... the people then pay thier wages out on goods that incur tax.... and get a buzz from that which means they place lots of value ofn materialism so paying more tax....... and people in the long term cycle are lilkely to come off TCs eventually so can then feed tax into the system without getting any back....

It's all a con of course but it's the one that keeps our country away from complete collapse- otherwise nobody can afford to work, or employers will go under paying a higher wage, which emans many more on benefits with less tax coming in to fund it.... the only other alternative is no welfare state and watching peopela round you suffer if youa re lucky enough to be one of the survivers.... hey ho

expensive profits = expensive products - durrr!

lou It's a big, fat, fucking con. I work for an enormous multinational which employs 250,000 worldwide - we've had an enormous push of jobs being outsourced and yet we're still turning BILLIONS in profits. Think we, the workers are seeing benefits? Christ no... it's all going to the shareholders. Oh, and our workforce has not been greatly reduced - we're simply employing more people (cheap people) via the sub-continent.

I don't know what the answer is, I really don't. I agree with anotherplace in that minimum wage is just way too low - and I kind of feel that if you need the government to top up the wages you pay then your business is not viable.

It feels like a "capitalism will eat itself" type thing. E.g., my company wants to pay its western workers minimal wages - but once they've impoverished us - who is going to buy their expensive profits? It will not be the Indians/Chinese...

If minimum wage was set at a higher level, UK businesses woudld be even less competitive than they are now, and the economy would be well and truly stuffed. Look at the way telecom services, gas services, bank services, etc. are already being outsourced to India, etc. to save staff costs.

If the minimum wage were set at a more realistic level there might not be this need for the hugely conplex tax credit system.

How can anyone keep a family on a job that pays £5.80 an hour - esp in the South East.

I would be homeless and bankrupt without tax credits, because all my jobs (employed and self-employed) are so precarious and results-dependent.

yes lou and I truely do not begrudge those who work very hard for little money etc etc or all those grot jobs dealing with vomit etc etc.

I was thinking more on a bigger scale why should the state subsidise private profits? that if you give away lots of money then prices go up, that in some cases they discourage people from working (not nec. a bad thing but not what they were presumably supposed to do?) and what about the 50k thing? surely the cut off should be lower? I don't know where 30k?

But lots of people work truly very hard, doing long hours, for very little money. Which means that they rely on the top-up of TCs.

I see I've just said what everyone else has said. But you lot said it better!

I'm sure they have helped increase general inflation/property prices, people don't earn enough so in order to remove their anger at their employer (gov or private) and to limit strikes etc they get given some more money but if (simplistically) you give everyone 1,000,000 pounds prices will simply go up.

There is also presumably for some a perverse disincentive to work more after all why should you do more hours at work when gov will pay you the same if you don't?

I don't understand entitled to .com etc but was on there the other day (looking at cutting hours (though I'm more likely to be out of a job)) and was shocked by how much I would get.

Quite why someone earning over 50k needs them (outside of London) I don't know

Havent read all the thread so will just ad dmy POV

TC's ahve been a lifesaver for us'; I am a carer so cannot work, DH was amde redundant and now is retraining alongside a low income job.

Without TC's he'd ahve had to accept defeat and claim dole. This way he gets to rebuild his life and then start being a net giver again.

Win win.

We don't claim or need tax credits, earn too much, so feels a little unfair commenting on them. But I do know people who do claim them, my hairdresser for one! He has two very young children and they made the difference when his wife was looking to return to work after Mat leave, without them she would have had to stay at home, with them she can work three days a week and they're better off. Personally, I think that choice she had is a good thing and so do they both. You can see it as subsidising large employers poor wages, but I think the tax regime for large businesses is a seperate matter and yes let's close as many loopholes as possible so that firms pay tax in the UK if they're based here and sell their goods here, that's only right and proper. But not mix that up with ensuring people on lower salaries can actually be better off working. To not be in the labour market when you want to be is a terrible thing, you lose confidence, de-skill etc, very quickly - and we really want to make sure that everyone who can work does work wherever possible. It's a really sensitive calculation at that level, whether working will make you better off, if that means you lose housing benefits, council tax benefits etc. and really every penny and pound counts, that's why the tax credits work.

But a decent wage should mean that working part time is an option if you are prepared to make sacrifices when it comes to managing your finances. Then people who work full time have more than a living wage and actually have money over for spending.