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

[moondog]

Why can't they just tax you less to beign with? All this taking it away then giving it back must cost a hell of a lot to administer.

yy

I think that is the point

[cynic]

moony can I hijack or shall I start a new thread - wrt a link you put on here aaaaaaaages ago about why Thomas the Tank Engine is good for children with autism

Here's one. Very interesting points raised.

I think that lots of people get more in tax credits than they pay in tax. So they are basically an additional Income Support.

I agree that it's a fecking ridiculous system, purely designed to create Treasury jobs. Would be much simpler administered through the DWP or whatever they call themselves these days.

Tax credits was designed to make sure middle class higher earners did not get the benefit of the tax cut that Labour wanted to target at core Labour voters.

For example, I am a very strong believer that everyone should get a personal allowance of £10k so that low paid people pay no tax. Simple and fair. Unfortunatley, if that was the case middle class quite well paid people would also pay no tax on their first £10k and Labour finds that unaceptable so a much more complex system of rebates had to be designed that benefited only low paid people but not higher earners.

Bonkers. The whole thing needsto be scrapped and a fair generous tax free personal allowance brought in. I strongly beleive that no one on minimum wage should pay tax. It would stimulate the economy too as poorer people tend to spend their tax rebates not save them.

Sounds reasonable Abeta.
As a public sector worker, I am enraged by what is frittered away and the lack of respect accorded to 'free' services.

Makes sense to me abetadad.

I just think of the people who have got caught up in the adminsitratuve nightmare of tax credits. It seems so unnecessarily complex.

The way you put it seems to make so much more sense.

I suspect they were invented to bribe people to vote labour.

We claimed them about 4 years ago and they were a farce, they kept swinging from saying we were being overpaid to underpaid. I stopped claiming them and have never done so again. I think we earn too much to get them now but I do despise them.

People on low incomes tend to have irregular incomes so tax credits can become more of a curse than a blessing.

I had not thought of them in that way Abeta but that makes sense.

brilliant, moony

Thank you so much

As you were tax credit peeps

ABD - that would be so much more sensible, and of course would be partially funded by not having the huge waste of incorrect payments via tax credits.

A pleasure BALD.
Interesting LIW.

I second ABetaDad's comments. Something else the government did that was very cunning was to abolish the child tax allowance (I think in the late 90's, it was during the first Blair term). Every parent lost a wedge of 'free pay' and started paying tax on the single person's code. But tax credits were introduced at the same time as a much-trumpeted 'new' benefit, whereas in fact they were simply a red-tape-entangled way of giving people back the very same tax they'd already paid.

This subject frustrates me a little, because people think that they are a rebate on tax paid, and then that gets reduced to a simplistic model of 'don't tax them in the first place'. But the fact is for some families, such as ours, that would leave a massive 'hole'. As a family with 3 children, 1 of whom is under 1 and another who is disabled, we get more in tax credits than DH gets in wages. They allow us to survive.

I think in fairness, though, for people who fall into the (quite huge) range of income that gives a £10 per week tax credit, it must seem absolutely pointless to receive 8 pages of A4 paper detailing all the money they are entitled to, then explaining away all but £10 per week of it.

Negative income tax combined with a decent tax allowance would work tho'

Say every adult in the house got a 10k tax allowance & each child 5k (don't look at the figures) so a family with 3 children would need £35k tax free to live

If they only earnt £20k they get £15k in tax credits

If they earn £50k they pay tax on 15k

Sorted

OK I know it wouldn't work - but something like it?

Without tax credit do couldn't afford to work, his wages are £780'a month, tax credits top it up enough to make it a liveable amount.

and do't forget that you no longer get a chlld alowance in the benefits either, if you're on benefits you get CTC.

Well what is the point of a job that doesn't pay a decent wage?
Isn't it a weird sort of economy where peopel work but no the work they do does not pay them to cover thier costs.

Madness!

And I am not stirring, I am genuinely intrigued. What would other political parties say was the answer to this? Is our whole economy fake then a sort of Potemkin facade to the fact that there aren't enough real jobs for real people???

katymac - another way I am quite keen on is that would solve your problem would be to give every adult £10k per annum and £5k to each child as a universal national endowment gift every year with no claim necessary. I think that would be simple and fair and we could get rid of benefits, tax credits, etc altogether. THEN tax every pound earned after that at some flat rate like 50%.

This solution is talked about quite a lot in academic economic circles but not sure if any country has done it yet.

That would be really cool - but there would be issues about ensuring households couldn't claim for dead people

Very futuristic

There would have to be individual finger print recognition or iris scans to claim the money but that brings in a whole range of civil liberties issues.

Civil liberty Ha!!

If you want the money accept the trauma