Tax breaks for the living wage?

Labour would offer tax breaks to persuade the private sector to pay a living wage as a way to boost productivity and cut welfare bills, Ed Miliband will propose on Saturday.

The Labour leader suggests that firms could be offered either tax reliefs on training or capital investment, or lower business rates, in return for paying the living wage.

Doesn\’t that just upset the apple cart.

For all the numbers bandied about by the campaigners say that the point of a living wage is that taxes paid by the workers will rise, tax credits paid by the taxpayers will fall. The Living Wage is good for the government finances.

But if companies get the tax breaks to pay the Living Wage then those numbers don\’t add up, do they?

13 thoughts on “Tax breaks for the living wage?”

  1. Bertram Simpermost

    Clearly it depends on the amount of the corporate tax break. If the lost corporation tax revenue exceeds the (extra income tax + extra NI – the reduction in benefit payments) then the measure has a nett cost

    If there is a higher cost (to the Govt) then does that reduce the productivity (of the country rather than the corporations)?

    What am I missing here?

  2. That is just a hand-out to all those companies who already pay higher wages because they need to do so to attract the staff they need.

  3. I bet each of the main political parties have a secret committee which is charged with coming up with one daft idea a day. That way, each party can make a “policy announcement” every day, and one week later everyone has forgotten about the daft idea / policy announcement.

    Yes Prime Minister should have done an episode on that.

  4. Wait, so they’ll tax companies who hire less productive people extra? They should consider whether there might be some unintended consequences here.

  5. No those numbers can’t and won’t stack up.

    However, they are as usual missing a right old trick, namely that The Laffer logic applies at the bottom end (reduces cost of means tested benefits) as well as at the top (maximises tax revenues).

    So the NMW itself is meaningless if you only keep a third of what you earn after tax and benefit withdrawal.

    If done correctly, reducing the rate of means testing + tax to no more than (say) half means that people’s net extra income for the same gross wage goes up by half, therefore there’ll be more people working for the NMW at no extra cost to the employer etc.

    http://markwadsworth.blogspot.co.uk/2009/11/laffer-curve-and-means-testing-benefits.html

  6. A headline grabbing wheeze that will be forgotten tomorrow or the day after, just like the Liam Byrne thing the other week on…er (benefits). Come on Labour, make it a bit harder, why can’t you? You are sleepwalking towards defeat.

  7. Another example of the ludicrous complication that politicians introduce to the fiscal system. Why introduce new tax breaks for compliant companies? Why not instead use those funds to reduce or abolish national insurance for those earning less than – say – 10k pa? Far simpler and less open to being gamed by corporates and their accountants.

  8. @ David Boycott

    The problem what that idea is that it sensible and really easy to implement. Miliband was kinda looking for something vague and impossible to actually follow through on (i.e. he won’t get too clobbered if he wins an election and doesn’t do it) but which makes it sound like Labour are trying to come up with some ideas, and pays lip-service to a few of the current beefs of the mainstream not-really-all-that-left.

  9. Aren’t those of you who support merging NICs and Income Tax/increased personal allowance/reduced NICs, simply doing so as a means to an end though? ie. a flat rate tax.

    In other words, increase lower rate personal allowance whilst reducing higher rate threshold so that the two meet somewhere in the middle and we end up with, say, a 30% rate for all

Leave a Reply

Your email address will not be published. Required fields are marked *