.. to think it's about time we taxed *household* income

[sussexman]

Reading today about the Labour proposal to tax the top 5% more heavily in order to pay for public services. It just strikes me as very old fashioned thinking to not take account of the fact that most households have 2 earners and that it might be better to tax the household income, not the individuals.

Using Labour's top 5% - take a couple each earning £45k - they'll pay 22k this year in tax and NI. If one of them was a SAHP and the other on 90k they'd pay 30k in tax and NI. It seems to me that we could fund better services, both more fairly and without clobering everyone so hard if the household income were taxed rather than the individuals.

None of this is intended as a plea for the rich - or indeed a suggestion as to what the rate should be - just a suggestion on a fairer tax system. AIBU?

[sussexman]

Thanks for all the feedback so far. A couple of things so far stand out

It's clearly perceived, by UK posters, that this would be harmful to equality. That view doesn't seem to be shared by people in other jurisdictions. I can see both sides - we treat our income as joint and always have (and have varied as to who earns more) - so it's true that this hadn't occurred to me, it's not true that I don't care.

I would define household in exactly the same way as is done for benefits. They are two sides of the redistribution coin to me.

And btw it's nice to be described as "you must be young" :) I started working in 1989 as it happens...

[MangosteenSoda]

Where I live the tax system is very simple, so not sure how easily something like this would translate to the UK...

You can be taxed separately or as a married couple. They will charge you at the rate which works out lower.

If married and one partner doesn't work, the working partner gets the personal allowance of both people. If you have children or other dependents, you can choose whose income to best set their tax break against.

It's not a PAYE system. We file our taxes at the end of the financial year (now), so I think this would be difficult to implement in the UK. I don't think it impacts on female emancipation.

[sussexman]

@kursk - didn't see this earlier. Government as a business is a non starter. UK govt expenditure is ~ £800bn. That's the same as about 10x Google's worldwide revenue (not profit). There's no way we could fund health care, education and so on on a commercial basis. Even if you just left pensions, health care and education you'd need to find profits of £390bn each year. www.ukpublicspending.co.uk/government_expenditure.html

[OlennasWimple]

the key thing for me would be the ability to choose whether to file taxes as a household or individually, both from a financial point of view (in the US, and I presume elsewhere, you run the figures both ways and decide which way is likely to be best - usually joint filing), and from a personal circumstances perspective. This means that if there were particular reasons to file separately, such as a recent separation particularly if abuse is involved, both parties can elect to file separately with no problems.

Again, it may vary elsewhere, but in the US it's only dependent children that get included on the tax return, so the issue of adult children living at home is irrelevant. And by making deductions for each dependent child, the government is acknowledging that larger households have a higher cost to shoulder than smaller ones.

It's not a perfect system (and having to file both state and federal tax returns is a PITA), but it does seem to work pretty well and I don't see a reason in principle why we couldn't do something similar in the UK

[CormorantDevouringTime]

The tax system is only one part of the decision to WOHM. The German educational and general administration system is not conducive to full time WOHPs. If school finishes at 1pm and all the shops are closed at the weekend (slight exaggeration but they're definitely not a 24/6 culture) then both parents working until 5 every night with young DC becomes problematic. The Danish tax system allows (or used to, I may be out of date) a lot of tax allowance transfer between spouses which would in theory incentivise SAHPs but because they have a lot of good subsidised childcare and short and flexible working hours SAHMs are actually pretty rare.

[BuggerOffAndGoodDayToYou]

I think that couples should have the OPTION for joint taxation.

I work but don't earn enough to pay tax, DH pays higher rate tax. Our total income is around £68k and as a result we have to pay back the child benefit I get on DHs tax bill each year. Our good friends both earn roughly equally have a total income of around £70k. They pay around the same tax as us AND get to keep their child benefit!

Calculations for your children's student loans are all based on JOINT income so we should at least have the OPTION to be taxed jointly too. Until 2000 there was, at least, the married persons tax allowance. I claimed while I supported DH and then we switched it to him while he supported to me. We choose to be a partnership and joint taxation would NOT make me any less of a person or any less of a woman.

[MangosteenSoda]

We also lived in Germany for a couple of years. I see it's mentioned on here a bit.

In Germany, you have no choice other than to file as a married couple. Non married partners cannot file as a household (I think). It's almost certainly financially beneficial for the household to file as a married pair. Same problems re possible financial abuse as pps have commented on, although I think you can register as separated within the year of marriage separation and then taxes will be individual.

I don't think this has a big impact on females in the workplace. West Germany is pretty traditional and the way school and childcare is structured makes it more difficult for both parents to work full time. Former East Germany less so.

[fiorentina]

Whilst accepting that women really wanted and fought for separate taxation this annoys me that as the main breadwinner we are taxed more heavily than if my DH worked and we earned half each. Why should I pay more?! We don't 'use' services more than those with two incomes..

[SnapJack68]

mangosteensoda where do you live. .. sounds like a good system

[MangosteenSoda]

We are in Hong Kong.

[Want2bSupermum]

fiorentina I agree with you. I actually think it's passive aggressive male bullshit that women are taxed separately. So you married your partner and made a commitment to each other yet when it comes to your taxes you are not actually committed to each other?

I really do like the set up of the US system. It's very fair and it does make divorce a lot easier because it's jail time if you hide assets. The IRS does not mess around and will have you in jail for lying to them.

The issue with the US system is all the itemized deductions which are a PITA to record on the tax form and are expensive to administer. It would be better to just do away with all but the medical, childcare and mortgage interest deductions and just not tax those making less than a certain threshold.

[MrEBear]

I'm assuming that when we say taxed jointly we mean:

Single person can earn say £10500 before tax
Couple can earn say £21000 before tax

Single person earns £43000 before paying 40% tax
Couple earn £86000 before paying 40% tax.

Therefore it would benefit couples with a higher and a lower earner. It would help a £20k who's partner doesn't work that person wouldnt pay tax, it would also help higher earners who earn £60k but who's partner earns £20k keeping them as a couple down in the 25% bracket.

Talking about childcare costs and both contributing to the economy doesn't really make sense I doubt many SAHP do just that. Meany will be the ones doing the shopping, lunching out, taking LOs the the loads of groups that are on Mon-Friday.

[OlennasWimple]

Yes, that's broadly how the tax bands work in the US (in the state we wile in, anyway). As you say, it works well for couples who have very different salaries, as well smoothing out the current cliff edges in the taxa and benefits regime when one earner crosses over a threshold to the next band up

[JanetBrown2015]

Many of us campaigned for decades for the rights of married women to hvae a separate tax return and be able to keep income secret even from a husband to ensure women were no longer the property of their husbands. We really must fight very hard to ensure we continue to keep separate taxation of husband and wife. Women fought very very hard for the current situation.

the child benefit changes were a massive back track on it which are appalling.

[Ilikecheeriosyum]

How about they chase the likes of IKEA and shifty companies for the tax they dont pay, instead of taxing people who are honest and pay what they have to?

They'd get shit loads more from Ikea a year than they'd get from loads of well off people

[MrEBear]

TBH I think we need to have a overhaul of the whole tax / tax credits system / child benefit system.
I'd also think that widowed parents should be able to continue to benefit from their partners tax allowance if they have children under 18. Unlike other single parents they have nobody to support them in child raising, they don't receive maintaince or any support from anybody else. Esp as they are no longer going to receive widowed parents allowance.

[Want2bSupermum]

I think they way single parents are supported here is a fair system. Say you have a couple with 2DC. They separate and 1 parent pays maintenance to their OH. The income of the parent paying maintenance is reduced by the amount of maintenance paid and the OH receiving the maintenance adds the maintenance paid to them to their taxes.

The parent paying the maintenance has their income adjusted so if they are left to be low income they will get the necessary support. The recipient is nearly always in a lower tax band because they earn less and will be filing as head of household which has very generous thresholds compared to married filing joint status.

If you have DC and aren't married what happens here is that the lower earning parent includes the DC on their return, filing head of household. The higher income earner files as single. This way the head of household will qualify for all sorts of benefits from free childcare to Medicaid, FSMs, SNAP, WIC and housing assistance. This is a known issue in the orthodox and multi-wife Mormon-esque communities where the couples are not legally married yet live with their OH as man and wife.

[WankingMonkey]

Independent taxation makes more sense to me. Household taxation would have issues of two lower earners having childcare costs, one high earner not having these, and both getting taxed the same which doesn't seem fair.

Of course childcare could be paid for by the government, but this would mean raising taxes in general and those without children or who get childcare done from family/friends for free would feel hard done by.

Whatever the taxation system is. the benefits system should match it.

This I agree with though. I also feel maintenance should be taken into account for income related benefits, though I doubt that idea would go down too well on here. This could only ever happen if the CSA sorted their shit out though and made people pay rather than the shower of shit the system is at the moment. I would be tempted to sort that out by an attachment of earnings tbh, rather than expecting the non-resident parents to cough up off their own account, which obviously only happens if they are a decent person who cares about their children.

[WankingMonkey]

How about they chase the likes of IKEA and shifty companies for the tax they dont pay, instead of taxing people who are honest and pay what they have to?

Oooh we can't be doing this. The companies will just leave the UK

Yes a lot of the countries debt, spending, etc could be sorted/helped if anyone had the balls to tackle tax avoiders properly.

[ChardonnayKnickertonSmythe]

Why is everybody going on about childcare costs?

They are substantial, I agree, but you don't have them all the time, once the children start school that's it, whereas taxation is for much longer.

[MissShittyBennet]

That's just not true. Loads of people still incur childcare costs long after the youngest starts school, for wraparound and holiday care.

[BuggerOffAndGoodDayToYou]

Many of us campaigned for decades for the rights of married women to hvae a separate tax return and be able to keep income secret even from a husband to ensure women were no longer the property of their husbands. We really must fight very hard to ensure we continue to keep separate taxation of husband and wife. Women fought very very hard for the current situation.

TBH I'd rather increase our family income than have SECRETS from my HUSBAND and I don't see how joint taxation would make me the property of my husband.

[ChardonnayKnickertonSmythe]

OK, maybe, but definitely all the time they are paying tax.

Childcare is limited in time.

[ChardonnayKnickertonSmythe]

True, BuggerOff, once I start having secrets as big as bank accounts from my husband I might as well leave.

Also, imagine this the other way. Changes in taxation,, so your husband can have financial secrets from you. That won't go down well, I would imagine.

[Overrunwithlego]

Chardonnay Childcare is limited in time but is substantial. For my two kids, they've used between them 5 years of nursery, and now they are at primary school they are in kids club 3 days a week. Presuming they both need this level of childcare until they finish primary (so seven years each), total cost will exceed £80,000. That is (roughly) the same as what someone earning £20,000 a year would pay in tax over 40 years (allowing for roughly £10k tax allowance and 20% on the next £10k).

So you can see why childcare costs are raised so often in debates like this.