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.

I do worry that the tax system is being used to subsidise low wages and perhaps an unsustainable cost of living including housing.

I think that the general idea is that by forcing the minimum wage up to a living wage, business owners would have much higher overheads. This means that the cost of their products would go up, and we as a country would not be able to be competitive. By allowing the minimum wage to be low, the business owners can stay afloat, and government tops up the income of those who are poorly paid.

So capitalism only works if the state props it up.

Capitalism works fine without the state. Its just that it tends to result in slavery (or peasant serfdom) at one end of the social scale and immense wealth at the other.

See Victorian Britain or modern day China for details of what laissez faire capitalism looks like.

I feel like I am part of Victorian Britain as I am about to enter my 16th working hour of the day ( I have deducted an hour for travelling and eating it is really 17) so capitalism clearly does not work for us public sector softies. I need someone to wave the red flag for me.

So what happened before tax credits? I moved from the UK 2 1/2 years ago and don't really recall the issue of tax credits then, but as a number of posters have indicated here, they couldn't survive without them, what happened before they were introduced?

twinsetandpearls Quite, take for example the UK's biggest supermarket which pays so very, very, very little corporation tax - yet pays its employees so little that they must claim benefits tax credits - so as you state, the government is actually paying for the supermarket's employees.

Now you could tolerate this if they (the supermarket) were just breaking even...

ozziegirly It seems to be a self-perpetuating problem. The gov throws money at the "poor" and sets prices for rents (at council's discretion) which then pushes prices of rents up (e.g., I mean why would you rent a house for 400 pcm if the council will pay you 775) which in turn pushes more people in to "poverty" because they can't afford the 775 privately and more people need to claim. This is of course only one side of it - others will have other examples.

The wheels are about to come off the bus though - more benefits give out than income tax in.

Hate tax credits. Agree with ABetaDad and Skihorse.

Think they should be a benefit applied for by small businesses to top up employee wages and for people going into work from unemployment. Once again - a perfect example of Labour taking a reasonable intervention for those in need and ruining it by trying to apply it across the board...

(Cynically wonders if it has anything to do with the fact that if you make people people dependent on the government they aren't going to vote in a party who might cut those benefits.)

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.

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.

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.

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

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

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.

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?

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

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.

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.

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...

expensive profits = expensive products - durrr!

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

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.