Massive Government welfare cuts will be met by removing tax credits from around 3.7million working families under plans being considered by ministers.

El Gordo definitely expanded the welfare state. So, not absurd to consider the Tories reigning it back in again.

Under the plans a two-child family where at least one parent works full-time would see its tax credit entitlement running out at £28,847 of earnings rather than the current £32,969.

Where you set that limit, and the rate of taper, determine the marginal tax and benefit rates faced by people. And those rates then determine their reaction to those incentives.

Don’t know enough about the rates and so on to really know, but that someone on 10% above median household income, 20% or more above median individual income, no longer gets tax credits doesn’t sound quite like the massacre of the firstborn to me.

and that someone on 150% of median incomes is getting a tax credit currently sounds remarkably generous in fact.

18 thoughts on “Hmm, not sure”

  1. I used to think that Working Families Tax Credit was a ridiculous idea. However, -and tips blog has a lot to do with it – I don’t really see the difference between this and a basic wage or negative income tax.
    I’m open changing my mind back of course.

  2. Tax credits were a cynical ploy by Broon to get the lower middle classes benefitting from the benefits system so they’d vote for it.

    And permitted a bureacuracy to be built to give back money taken in tax rather than taking less at source.

  3. It’s the name that bothers me. Child Tax Credit is really just another form of child benefit: you get the money even if your earnings are below the tax threshold.

  4. As discussed on a previous thread Osburke could make vast cuts in state spending without touching the benefit system. Ultimately the entire system must go but it should be done in a careful and long-term manner to allow the millions now dependant on the state to find their feet and become independent.

    BluLabour don’t want that any more than ZaNu do. They want millions dependant because otherwise their empire isn’t needed and they are on the dole. They just want soundbite cuts and always to benefits. So that they can claim to have cut the state while handing out tax money to middle-class marxist commissars and their business buddies hand over fist.

  5. @Ironman: If one put the systems in order they would go : top – citizens basic income, then negative income tax, then tax credits. This is because tax credits is effectively pure communism for those whose incomes fall within its sphere – income is determined by need, not effort. Thus two identical families will receive identical amounts of money, regardless of how much they earn themselves. There is no incentive to better yourself, work harder, take promotion, as you immediately lose tax credits. The incentive is to work the minimum hours to qualify and at a job of no great responsibility/difficulty and get the same income as someone who does work harder.

    A negative income tax system has similar problem, but it would depend on the extent to which the system was tweaked to take into account personal circumstances – if it was a purely hourly makeup it would be an effective state paid minimum wage, if it paid a full time income for part time work it would be similar to the tax credit system and just as destructive.

    The CBI is the best of the lot because its a flat rate, everyone gets the same, and when you earn more money on top you keep (after tax of course) the lot. There is every incentive under a CBI (depending to some extent on the level of course) to work harder, to get new qualifications and promotions as you will always keep most of the extra cash you earn.

  6. ‘I used to think that Working Families Tax Credit was a ridiculous idea. However, -and tips blog has a lot to do with it – I don’t really see the difference between this and a basic wage or negative income tax.’

    I used to think being punched in the face was bad. Now I don’t really see any difference between this and being kicked in the bollocks or given a dead arm.

  7. Another outstanding, worthwhile contribution from Interested. You really do occupy your space on Earth well don’t you.

  8. Jim – had never considered myself to be receiving pure communism before. Can I sell it? Can I dilute it and push it to others?

  9. I hope never again to see taxpayer funded adverts proclaiming there is money with your name on it or featuring cash falling from the sky.

  10. @ukliberty: as that post is all about unemployed benefits, and this thread is discussing in-work benefits, I fail to see its relevance. Indeed the post itself mentions the very thing I have – the massive lack of incentive to improve ones income that the current benefit system creates.

  11. @ Tim
    The median household does not comprise four members, so 10% above median income for a family of four in a house provides a lower standard of living than 10% below median income for the single person in a flat next-door.

  12. One of the problems with working tax credits is they’re so bloody inefficient; people ahving already padi trax have to fill in forms, other people paid to deal with them and pay back money, still more people paid to notice credits have been overpaid and reclaim them… If working people can’t get by after tax, tax ’em less rather than expensively give the tax back .

  13. @ukliberty: as that post is all about unemployed benefits, and this thread is discussing in-work benefits, I fail to see its relevance.

    I can’t believe you read it properly. It’s about how the benefits debate is framed in terms of those out of work when more money is spent on those in work and mentions in work benefits several times.

    Indeed the post itself mentions the very thing I have – the massive lack of incentive to improve ones income that the current benefit system creates.

    The quote that says “next to no incentive to earn more for those on tax credits”, which is really about people in work on low incomes who get working tax credits, not just people with children who have applied for child tax credits.

  14. “It’s about how the benefits debate is framed in terms of those out of work when more money is spent on those in work and mentions in work benefits several times.”

    But we aren’t discussing out of work benefits are we? We are discussing how the money is spent on those in work, and how that money creates perverse incentives.

    And I don’t even think ‘the debate’ about welfare is framed in terms regarding out of work benefits. I think most people know very well that pure ‘dole’ is not very generous in this country. JSA is what, £70/week? What is generous is the in work benefit system, and the system that allows anyone with children to claim extra money reagrdless of whether they work or not, and the system that allows many people to claim they (or their children) are ‘disabled’ and thus achieve a standard of living far in excess of their ability (or desire) to provide for themselves. That is where people get annoyed – seeing their ‘disabled’ neighbour with his ‘bad back’ off playing golf in his mobility car, while they get up at 5am to work shifts in a warehouse, and pay taxes to allow the lead swinger to live the easy life. They get annoyed at people who have huge families, and have to pay taxes to pay for them, when they can’t afford to have another kid themselves. Thats what gets up people’s noses, the long term abuse of the disability system, and the way kids are used as an income source, not that someone who lost his job is getting £70/week JSA for a few months.

  15. But we aren’t discussing out of work benefits are we?

    Are you hourly? As I said, the post is also about “in work benefits”. It talks about the welfare paid to people in work.

  16. @ TomJ
    Gordon Brown was creating class of voters dependent upon hand-outs from the Socialist government in order to create a 3% block that was enough to guarantee a Labour Party victory in a general election.
    @ Everybody
    Can you believe that there are 3.7m four-member families – i.e. 14.8 million people, well over 20% of the population, with earnings in the range between “£28,847 of earnings rather than the current £32,969.”?
    Also the sky is green with pink polka dots.

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