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 hold my hand up to being pretty ignorant about economics but it just seems very odd that we the tax payer subsidise low wages. People say big businesses can't afford to pay the wages, well my experience if big business says something different. But can we the tax payer afford to keep footing the bill? I worked in a school that could not afford to pay it's staff. Quite a few if us did not draw a full salary. It makes me mad to think we did this so the public pot could be stretched further so multi millionaires if not billionaires could under pay their staff. I have no objection to taxes going to support those who need it, in fact I would happily pay more tax. But not so that fatcats can get fatter.

But as I said I know nothing and could be wrong.

The whole administration of tax and benefits is nightmarishly complex and not integrated.

In essence, tax credits are a bridge between the tax system and the benefits system. I agree there are many ways of simplifying the system but it would cost a lot and take a lot of time to simplify, so successive administrations have just ducked the issue.

It just seems very odd to me how people on above average wages are seen to be in need of state help to meet their living costs. I am not questioning that need but saying something has got out of hand with the cost of living and I wonder if tax credits have been a factor in that.

Agree twinset that was the point I was making earlier!

problem with raising the minimum wage to a realistic one for living is (imo) not that they can't afford to pay those workers more, but everyone elses wages would have to go up as well.

For example I was paid £5.50hr when I worked nights a few years ago (was the minimum wage then), I was an unqualified care worker, the night manager was on around £8hr

So - lets say they put the minimum wage up to £8hr - so £16.5k (approx) before tax per year (based on a 40hr week, I did 28 1/2) . They can't really leave the night managers wages at £8hr, well they could but if I were the qualified care worker, managing all the night staff I wouldn't be happy to find that my unqualified "juniors" were earning exactly the same as me.

So it's like a knock on effect

tax credits were what came after working family tax credit

working family tax credit came in septemebr 1999 and meant for the first itme that if you came o benifit and went into work you could have your wages topped up if they were low and you could also have 70% of your childcare paid for if you were a single mum.

This was a great incentive to get single mothers back itno work as they had always complained if they worked they were worse of than claiming unemployemtn benifit as they needed to pay for childcare and petrol cost.

The working families tac credit was based on 6 weeks wage slips and claimed every 6 months and paid through your wage slip by your employeer.

You coudl as a single mother also claim the married mans tax allowence - so you got an extra £500 pounds per year tax relief

Then the scraped the working tax credits and made them tax credits and child tax credits and scraped the working mans tax releif or £500 per year.

Your wages are made up to a nationla minum for the amount of epole in your hosuehold.

So if you earn £6500 a year you will of course not pay any income tax, onyl NI contributions, and you will have your tax credits and child tax credit topped up to the maximum

try telling someone working part time with child care that they should just get tax releif - I don't think they will agree with your simplist view op

and I never realised that about thomas but my cousins lad loves him and knows all the names and number of every single engine it gives him a lot of comfort when on holiday and they take the video player and thomas tapes

Yes Ivy

And credits pay pther benefits too- for example some of the disability ones are delviered that way.

It won't ever be as simple as just doing tax releif, you'd dtill ahev to set upa a dept for different benefits to replace those covered as well. PITA