AIBU to think that sugggesting Tax Credits should be replaced by higher wages hasn't been thought through

[minkGrundy]

I have seen several threads where posters have suggested that TC should be done away with because they are a subsidy for low wages.

However, a lot of people on TC work PT. Many have no option to work FT as although employment is relatively high, under employment is also very high (plus there may be issues around childcare). So, even if their hourly wage was increased this still might not lift them out of poverty and it isn't that their employer is underpaying.

Also, a lot of TC are used to pay for childcare. If you increase the hourly wage of those using childcare you also increase the hourly wage of those providing childcare, which in turn pushes up the cost, meaning it is no more affordable.

Finally, TC replaced the increased tax allowance that families used to get if they had children. Why should a single childless person get the same tax allowance as someone whose wage has to support 3 people. TC should not be seen as a benefit but as a means tested tax rebate.

Any changes to TC will disproportionately affect women, children and women's wages. Many people I know myself included were only able to continue in their careers post having children because they were able to work PT when there children preschool and use TC to help with childcare. Otherwise they would have had to take carer breaks which would have resulted in them finding a return to the work place extremely difficult. Thus further increasing female unemployment, underemployment and the gender pay gap. Higher hourly wages would not have helped.

blister as I already clarified I was not suggesting you pay more tax. I was suggesting that those with dependents get a TA that reflects this. Which is what used to happen.

Or do you think that is unfair even if it has no effect on your TA at all?

I am also not suffesting that child care workers or any other employers don't get NMW.

I am saying the NMW which is hourly will not fix things.

I work. I pay tax. I get tax credits.
If I didn't get TC I could not work.

goodbye I think Mink, it's true that there are more net takers than net givers. You have to be in the top 40% of earners to be a net contributor. The reason we're not imploding is because high earners contribute disproportionately.

Is highly disputed and very much depends on how you slice and dice the figures. E.g. if you look at VAT those on low incomes contribute disproportionately. Tax is not just income tax.

Plus without low and middle income earners those on high wages would not be able to earn those wages. And at some point on their life they too will have been net takers. I.e. i believe those figures are based on a snapshot rather than the lifetime of the individual.

fullfact.org/articles/households_contributors_recipients_UK_benefits-28455

A different slicing and dicing of the figures.
Pensioners skew the figures as they are no longer net contributors. But they will have contributed when they were working.

Hence why I am saying you need to take a lifetime onto account. I have dc just now. Before I had dc the difference between what I received and paid in tax was larger.
When I was at school I paid notjing and received a lot.

So a snapshot does not tell the story.

And I have yet to see anyone come up with a suggestion for how you remove TC that is not simplistic.

as I already clarified I was not suggesting you pay more tax. I was suggesting that those with dependents get a TA that reflects this. Which is what used to happen

It's a distinction without a difference. If we earn the same wage, but I get a lower tax allowance because you chose to have kids, the net effect is that I pay more tax than you. Which is grossly unfair, when you think that I might have any number of dependents at home who I just happen to have not given birth to.

E.g. if you look at VAT those on low incomes contribute disproportionately. Tax is not just income tax

You see, I don't get this at all. I have read the research you are talking about it, but as with the tax allowance point above, it's an inevitable consequence rather than a proper correlation. If I earn 100k and spend 200 quid a week on food then I am paying less VAT as a proportion of my income than someone who earns MW and spend 30 quid a week. But so what? There is a good chance that the low earner also spends a greater proportion of their income on chocolate, bus fares and sanpro (say) but how could it be any other way? It's proportional!

No I don't agree with this. Single people and people without children should not have to subsidise even further other people's choices. I think tax credits should be phased out. I think the last election result shows that most people are willing to support those in true need but not people to whom handouts have become an expectation and lifestyle choice. Reform is very well overdue.

blister if you had dependents who you have not given birth to, would you be happy if that was reflected in your TA?

But I don't think it is unfair if people with dependents (of any sort) pay less tax than those without. Those dependents are also members of society and at some piint tye chances are they have or they will pax tax.

vivienne so TC are phased out.
What is your suggestion for those working lone parents (who may well not have chosen to be lone parents) who rely on TC in order to work?

Rather than seeing that people who are currently single/without dependents are subbing me, I prefer to see it that I am now seeing some benefit from the system that I paid into before I had dc and that I still pay into.

I pay tax. I have paid tax for years. I will be paying tax for years.

And those who currently do not have kids, were themselves kids at one point and as such they were supported by the rest of society, which paid for education, health care etc. Etc. So being without dependents now does not mean that you have never been subsidised by the state.

But I don't think it is unfair if people with dependents (of any sort) pay less tax than those without.

Of course you don't, because you would benefit from it! Who decides what constitutes a "dependent"? The usual army of pen-pushers who want a decent salary and a pension? And who pays for that? Out of what?

As Vivienne says, the single and childless already subsidise other people's lifestyle choices. The thing with HR taxpayers who are single and childless is that they are also very mobile, and if tax levels are punitive they will simply go and work somewhere else. (I moved to a low tax jurisdiction twice in my twenties so I could save for my first house). If enough of them do this, the benefit system (which is meant to support those in genuine, short term need) will become unsustainable.

I just don't see it as my responsibility to worry about how people who earn substantially above the minimum wage can afford to pay their mortgage and support their children. Tax credit subsidies should never have been applied to the extent they have been. The government is already going to provide more childcare for working parents. There comes a time when people must make choices according to their income as we have all had to do.

Sure, it's a snapshot. I guess you'd need to see a breakdown of the same by age to see if there's a trough during childbearing years (although men would skew this) and post-retirement. This would make me more amenable to child-friendly tax policy, although I'm generally opposed for the reasons Blister, Vivienne have already mentioned.

Whether VAT is proportional or not is irrelevant to being a net contributor/receiver. If VAT is not taken into account, then surely the gap is greater - someone on an income of 40K will spend far more on VAT than someone on 20K.

If it's impractical to drop the tax credits (which it probably is), then there should be a tax on goods produced by labor that is taxpayer subsidised i.e. tax credits. Kind of a like a cigarette warning label: "This good was shelved/packed by an employee paid an unsustainably low wage, and the government has been forced to top it up".

If you have a mandatory living wage prices will go up (e.g. people who work in shops will be paid more and this will be passed onto the consumer), and it will have the same spending power as the current minimum wage. An own goal.

But blister i did not and would not have objected when I didn't benefit from it.

And you benefited as a child from ither peoples tax. You will benefit as a pensioner.

And as for the people will leave argument, let them go. If there are vacant high incone jobs some one will fill them.

The government is going to provide a bit more childcare for working parents with children under 5. Kids don't leave home at 5.

And vivienne if those working parents whose TC pay towards the cost of childcare/mortgages have to give up their jobs/homes it will become your responsibility and that of every tax payer to pay to house and feed their children at a far greater cost than if they stayed in employment and kept their homes and retained their earning and tax paying potential until their dcs no longer require childcare.

Mink I don't expect to benefit as a pensioner simply because I don't expect there to be a state pension by then. I would rather not receive a pension if it means the country (i.e. our collective grandchildren and their children) living in penury to pay back the excessive government borrowing which is necessary to sustain the current level of welfare dependency.

Yes, I benefited as a child (free education, healthcare, etc) but then I have also been a HR taxpayer for over 20 years and have never received a penny in benefits (excluding emergency medical treatment, twice).

The simple point is that for many people it's a zero sum game. The majority take more out than they put in, and those that are net contributors already pay in more than their fair share. The childless ones in particular, because they receive sweet FA in terms of either benefits or services and are royally shafted when it comes to council tax as well.

I earn a reasonable amount (for an unqualified job, not by mn standards probably!) but still get a fair whack of tc as I have 4 children, one of whom receives Dla-my partner is at home as his carer. However high they raise wages it would not take me out of the benefit system at this stage! I'm also studying for a degree so maybe eventually i won't need to claim.

With four kids the child tax credit threshold is pretty high at around £45k.

It seems that whole swathes of people are relying on benefits. And others are being squeezed dry paying tax on tiny incomes. This is not what welfare benefits are for. I don't agree with people on £45K a year receiving welfare benefits.

And you benefited as a child from ither peoples tax. You will benefit as a pensioner.

This doesn't really hold water IMO. Every child is a net taker by way of their education, so it's pointless line item in the "net taker vs contributor" analysis.

would rathernotreceive a pension if it means the country (i.e. our collective grandchildren and their children) living in penury

But what if removing TC, results in children and gc living in poverty now. I don't see the logic in plunging them into poverty now so that they might avoid it later.
And again I question the validity of that sum. The cost of servicing the deficit per household is not actually very high compared to the cost of removing public services per household.

Even if as a pensioner you do not get a pension, you are still likely to get significantly higher services from the state than you do at present.

I currently subsidise pensioners. I don't mind. They subsidised other people when they worked.

But still no one has got to the notyom of this.
Increasing hourly wages doesn't cure the problem of underemployment.

Removing the benefits that make work pay for many households does not suddenly make more hours of work appear. If anything it will result in higher unemployment.

You cannot force people into work that doesn't exist.

Notyom!?! Bottom

I'd only support an elimination of tax credits if employers were required to provide a living wage. Which I can't see happening. It shocks me how people are still seen as scroungers, even though they're working. A lot of them full time