From the BBC. What they don't tell you is that the bulk of Tax Credits are in fact Child Tax Credits, which are payable whether you are working or not. I can't remember the exact split, but I think it's about £20 billion Child Tax Credits.
Muh, Far Right
1 hour ago
24 comments:
What they don't list is, as you have pointed out before, the biggest benefit is the personal tax allowance.
I wouldn't know where to find the real figure, but I guess approximately (21 million tax payers * 6500) 136 billion.
Surely every single benefit payment could be taken care of with Citizen's Income plus an individually assigned tax code? We could also have negative tax rates to take care of giving some extra to pensioners/disabled couldn't we?
Citizen's income works even without LVT.
They also seem to have left out the State Pension at, what? £60bn a year? I mean, if we're going to start looking at the bennies, let's look at them properly, eh?
Not some half-arsed affair involving withdrawing Child Benefit from higher rate taxpayers and then being forced into giving it back through a "couples allowance". Are these people recruiting for the public sector, or trying to reduce costs?
Oh. Silly me.
OP, the cash value of [personal allowance for income tax + earnings threshold for NIC] is approx. 30 million working age taxpayers x £6,000 x [20% + 11% + 12.8%] = £79 billion (+/- wide margin of error).
And of course CI works just as well with flat income as it does with LVT; it's just that LVT works better than flat income tax.
CEMFTTB: total state pensions + pensions credit + public sector pensions in payment etc = approx. £100 billion, minus maybe £10 billion income tax (the state pension wipes out personal allowance!).
"Are these people recruiting for the public sector, or trying to reduce costs?"
Silly you, I think.
Looks to be about £80 Bn. That's about £1350 each per annum, if you include all children - rather than exclude them up to age 16, which is about 12m souls. Excluding that cadre gives about £1675 per person / per annum. Exclude pensioners (over 60/65 m/f approx 11m) and you get about £2,200 pp/pa. So as i don't get any benefits Mrs Lola and I pay about £4,400 for every one else?
L, the way forward is Citizen's Income. You and Mrs L would get about £7,000 cash in hand, few questions asked. Or maybe they can just knock it off your LVT bill.
My house is valued at about 400,000. @ 8% (your indicative figure) we'd pay 32000 per annum LVT, less 7K leaves 25000 LVT - which is about what we pay in ALL other taxes. I like it! Where do I sign?
PS I have high hopes that LVT will force down house prices - or at least stabilise them.
PPS All OTHER taxes includes all the taxes on my business.
Correction. It's LESS than we pay in ALL other taxes when you include my business taxes - which, of course, I don't pay - my customers pay them.
Oi! Wadders!
http://www.stuff.co.nz/business/51070
(Hat Tip: marginal revolution)
Before we transfer to CI, wouldn't it be sensible (as an interim and attainable measure) to make all benefit payments taxable and, at the same time, increase the personal allowance substantially. No, I haven't done the arithmetic (over to you MW) but suppose all benefit payments were subject to a deduction of, say, 25%.
The "rich" would have to add the value of benefits to their income and claim the 25% deduction against their tax bill: even so they would be paying 40 or 50% tax on benefits received. The "poor", in order to get the 25% back, would (as in the US) make a return to HMRC and/or see their PAYE code adjusted accordingly. For non-cash benefits (eg housing benefit) the deduction would be against the rent paid to the landlord and, in order to pay the top-up, the recipient of the benefit would, again, have to go through the HMRC return process.
Of course, right at the bottom of the scale the ancient "national assistance" for the very poorest would be resurrected. This, however, would be in the nature of state/taxpayer "charity" and viewed as such. It would not be viewed as a "right" available to every work-shy scrote in the kingdom.
Yes, there would continue to be a lot of taxpayer funds sloshing around the system and much money taken from the taxpayer only to go back to him/her. I would hope (though not expect unless a non-Osborne is running the country's finances) that introducing this regime would be reflected in a much simpler tax regime so that HMRC efforts could be targeted at the returns level rather than in administering the 11,000 pages of legislation and regulation at present in being.
U, far too complicated. Flat rate benefits are far simpler than paying a nominally larger amount and then clawing it back (see Tax Credits).
I don't have any children so I have never had to deal with this but can someone explain the distinction between child benefit and child tax credits.
JM, ChB and CTC are at opposite ends of the spectrum.
ChB is flat rate, non-means tested £20 or £15 per child per week, paid to all children. Fraud, error and admin costs are barely measureable. Total 'cost' £10 billion per annum.
CTC is about £30 or £40 per child per week if you are unemployed, but is savagely means tested (so discourages work and marriage); fraud, error and admin adds at least ten per cent to the cost. Total cost £20 billion per annum.
It may be the terminology but from a quick look at the HMRC website it seems that tax credits are available if you have children and apply whether you are in work or not. I can see that these are means tested but is that the only practical difference from child benefit?
JM, that is one main difference, the other difference is that you can get two or three times as much in CTC as in ChB.
So e.g. 13 million kids get £15 each ChB and 8 million kids get £50 each CTC (or whatever the figures are).
MW
All I'm proposing is that a one-off standard all-encompassing benefit should be subject to tax: that way the "rich" receive less return than the "poor" - how is that complicated? There's no malarky about paying back credits within the tax year - there's no paying back altogether. About 9 months into the following tax year - depending on the income of the beneficiary - the beneficiary either gets some of the tax deducted back, or nothing happens or, if he is "rich", he coughs up the difference between his top-slice tax rate and the deductions rate on the benefit
More to the point, there's no way in my lifetime (or yours - or that of your grandchildren) that a CI + flat tax will be introduced no matter how clearly superior it is to the present set-up.
U, as I've said elsewhere, it's good to have principles, but if you can't make them work on a practical/administrative level, the underlying principle was probably wrong. What you outline sounds similarly nightmarish to Tax Credits.
Don't forget that means testing is the same as taxation. It would make no difference in cash terms to me (as a higher rate taxpayer) whether they
a) take away my tax-free personal allowance or
b) they take away the Child Benefit paid to her Indoors (she is basic rate taxpayer) - tell me, which one is simpler administratively and more honest?
In any even, IDS is moving slowly towards a CI/flat tax, only he calls it "Universal Credit/Single Unified Taper".
> Citizen's income works even without LVT.
A citizens income from income tax is just group slavery. Totally immoral.
Lola: "Correction. It's LESS than we pay in ALL other taxes when you include my business taxes - which, of course, I don't pay - my customers pay them."
You do indirectly suffer though through reduced business.
I prefer the term Dividend over income.
The dividend should come from the Crown less the admin costs of the State.
Lola, I'd be cautious about expecting lower house prices after the switchover from the current system to LVT/CI. The price of houses depends on overall after-tax income and interest rates. If the median income rises as a result of the change to LVT/CI and interest rates remain at the current levels, rents and median house prices are going to rise. Can't do anything about the rents but raising interest rates would reduce house prices, since rents and mortgage payments are approximately in the same range owing to competition between them. Ricardo's Law of Rent in action once again.
L, good maths. That's about all there is to it. For most people it wouldn't make much difference.
Dearieme, thanks, well spotted.
AC1, CI/flat income tax is still a lot better than what we have now.
Derek, that's quite possibly true (see Danish experiment with LVT in the 1960s which had all the promised benefits, but was so successful that house prices went UP), but we have a massive public sector accumulated debt of £2 trillion (or whatever) so, subject to obtaining political consensus, there's no harm in hiking the LVT and using the proceeds to pay it off, which would have added bonus of keeping land prices below their equilibrium for the time being.
MW
I don't (necessarily) disagree. However, if there must be a payment from a department of state in respect of people having children - or for any other fatuous reason - then making the benefit subject to tax will take the sting out of the argument that somehow the "rich" are getting away with something by being paid a "universal" benefit without a means test. And no - the tax system is not a "means test" process in the way you are trying to use it. The tax system as developed in the UK taxes after the event: Brown's bright idea made HMRC a paying department (instead of a re-paying department) concerning which it had absolutely no experience and, accordingly, made the predictable cock-up.
My proposal does not replicate the tax credit system as "designed" by Gordon Brown. None of the money received would be repayable. It's just taxed as "normal" income like bank interest or dividends. All income (from whatever source) is thereby subject to tax: tax payable (which might be at a standard flat rate) is ameliorated by a personal allowance.
However you wish to criticise it, it is not complex. Unlike the present tax credits apparatus, it fits in with what HMRC was originally set up to do and is probably still just capable of doing (ie receiving a tax return and working out what tax you owe or are owed). Moreover, it's a gesture to reality: neither IDS - nor anybody else, unfortunately - will get us a CI + flat tax
U, sure, your idea has (superficial) political appeal, but only makes (mathematical) sense if we DON'T have a flat income tax, i.e. non-earners pay no tax on benefit income, normal people pay 20% and higher rate taxpayers pay 40% or 50%.
If we had CI/flat income tax (at whatever rate) then everybody would hand back the same fraction of the welfare received, and the purists say there would be no personal allowance - that's the whole point of having a CI!
MW
Point taken (about impact of flat rate). I would prefer CI + flat tax BUT there's no way that's going to happen so my proposal should have IMHO rather more than "superficial" appeal.
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