In not having much sympathy with a couple on £45k plus per year having some benefits cut?

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There is loads of this on the news just now about how "middle income" families will be having some child tax credits cut and might be paying more tax. They news are showing what to me looks like comfortable off families having to do with a bit less. Is this really so bad? I know an income of £45-£50k per year might not be much in central London but will keep you in style in parts of the north, but how bad will it be? So people might have to change jobs/give up the second car/holiday at home instead of Spain every year? SO WHAT? There are plenty of us living on less than £25k a year who have had to cut back since having kids and take this as a fact of life.

I know MN is made up of mostly middle earners and I'll get pelters for this, but I don't really care. Anyone I know on a middle income can afford to give up some things _ its called life.

While reductions in WTC and CTC dont have an impact, the top 1% of income earners now have a 50% tax rate. I would say that is an advance of the pain that everyone will be feeling over the next few years. Nothing I have read on this thread has convinced me that there shouldn't be a cut in tax credits. I would much prefer to see them go to the poorest households.

Flock makes a good point about a lot of the higher income using private healthcare and private schooling and taking the pressure off public services.

If you take those in the £80K to £200K bracket any harder, they might have no choice but to take their children out of private schooling, and compete for precious places in the good state schools, whose funding is going to cut.

There are downsides to higher taxing any income level. It wipes people out or causes extra strain on the state system or funds go elsewhere.

Which is why I think it is better to keep the state smaller post-recession. A large state can also be overly bureaucratic and not as efficient.

What do other economists (joking) think?

Goish yes, the one thing I hope the Tories will do is cut back the state. We are long over due for that. As for 50% tax it's not that - it's more if you add in NI and also the allowances and pension tax relief taken from higher earners too). The bottom line is the more you tax the very high earners the less you take in in tax so although it makes the poor feel happy it doesn't help the poor. You stab the poor in the back every time tax rates go to 50% and above as tax revenues perversely go down and there is less to pay to the poor.

Its well documented (I think its ecomomic theory) that once the rate rises above 50%, tax revenues for the State actually goes down. It's all very well for people to say that they want the higher rate taxpayers to also feel pain but as Quattro mentioned, between the 50% rate, the loss of personal allowance and the restriction in tax relief to pensions, the top 1% of taxpayers have already taken a significant hit this financial year.

degreechick-that is exactly what i was trying to say yesterday (and got tons of abuse for)

'this is exactly what i mean between the rich/poor divide. poor u only having a standard 4 bed, try living in a 1 bedroom council flat with 4dc and not even be able to afford a taxi let alone a car.
and then see who you should think gets the benefit cut, you earning 50k or me on about 5 0r 6k a year?'

the difference is that the one earning £50K is doing just that. earning it.

hopefully your situation is temporary, but it's hard to know from just one post.

and everyone is going to take a hit in this excepting the super rich.

may i ask how you wound up in a one bed flat with 4 children?

thing is, fanjo, the government we have now is what we've got. they're not going anywhere for 5 years.

everyone's going to take a hit so now it's time to start thinking how to spin money or spin what money you've got out.

there's no help for it.

they're going to cut, cut, cut because if we go the way of Greece is going to be much worse than those cuts we're going to have to take.

"the difference is that the one earning £50K is doing just that. earning it. "

Well said.

expat - I know, it is impossible to truly measure 'wealth'. But the thing that worries me is that the SAME people are hit each time - and the people hit hardest are the people JUST over the thresholds they set - in this case the 35k-60k earners.

If you earn a huge salary - say 130k like the cabinet - you can afford to be taxed more, because the amount left over is still more. Unfortunately, increasing tax for high earners doesn't increase tax revenue, because they simply arrange to be paid in shares, or something equivalent.

yes,you are right expat. I just think a small hit might affect some more than others. And i don't mean me either (altho i was called smug and 'not a nice person' for having these views). Have been on both sides.

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degree, if you're in a 1bed flat with 4 kids it really does go to follow that, at present, you are not in employment.

i've been helping BIL and SIL on their claims for donks now, and quite a few of mates as well.

people generally end up in that situation because they are fleeing DV and have no place to live and can't rent on their own.

yes, fanjo, everyone will take a hit.

we're working poor. i've said it once i said it again, this government will use the new £10000 threshold to justify all sorts of cuts that will affect people like us: a VAT hike, a NI hike, reduction in WTC in all likelihood.

we're not happy about it. we didn't vote for it.

but nonetheless, we are stuck with it.

Thing is, Fanjo, it will affect people differently depending on their outcomes. So the couple on 70k with 2k mortgage and 2k in childcare may be desperately watching every penny for the next 2yrs until their childcare costs drop off.

I know quite a few people in this situation. They bought at the height of the market, knowing it would be tight for a few years. They can't sell because their house is worth 100k less than they paid for it and nobody is buying anyway so they're stuck and watching every penny, despite their reasonably high earnings.

Why should they be penalised more than the couple on 25k who stretched themselves at the top of the market and have heavy outgoings too? They've probably got very similar disposible incomes (currently).

I think spreading the misery is the only way.

Oh and more council houses to increase stability for renters so those who cannot afford a mortgage don't overstretch themselves just to try and gain a little security for their families.

well, I just did a little experiment using the IFS calculator I linked to below. Using our income, number of adults/children and council tax bill, we are deemed to be earning 'more' than 42% of the population (in terms of standards of living).

I then did my brother who is in a 1 bedroom flat, and earning 25k. His standard of living comes out at 72nd centile - so a lot higher than ours! And that is probably true in that he can afford holidays abroad etc. I don't begrduge him this at all.

BUT the 10k personal allowance increase will benefit him, and penalise us - he should be £700 a year better off, we will be £1200 a year worse off.

That's what I mean about salary being a crude measure. When someone who has a higher standard of living is actually benefited by someone else's cut, who is already finding things harder.

There won't be any more council houses so forget that for a start, at best more housing association properties but again I wouldn't count on it.
The plan for a long time has been to lure people into Buy to let "investments" and now that has happened my guess is that tenancy agreements will change so that housing benefit has to be accepted by law and as long as the rent is paid the tenant has the right to stay no matter what.

there won't be more council houses.

no one wants them around them, for starters.

around here, a HA proposed putting up 11 shared-ownership houses. so that means the new residents will have to be in full-time employment because they have to qualify for mortgage.

the opposition was immense.

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The tenancy laws need to change to give families more security of tenure. We don't particularly want to own our own home and are happy renting. Our (rented) current place is lovely, but the current situation of six month tenancies means that if we want to stay in a this area, we have to buy our own home.

degreechick . I hope life improves for you very soon. I really do.

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