Who Gets What and Why?

I came across an interesting article from Money Week magazine while researching the background to tax credits in the UK.

The thrust of the article is that tax credits are paid far higher up the income scale than many people imagine and that it's possible to claim a package of benefits (while remaining on part-time hours) that go away beyond the average UK salary of £25,000 a year.

If you ask me the argument about tax credits ought to revolve around how far up the income scale these benefits are payable, particularly if they present a perverse disincentive for people to remain on part-time hours. 

Gordon Brown is in the news today claiming credit for the policy, but as everyone knows tax credits are widely used around the world and were introduced decades ago by a decidedly non-socialist President Ronald Reagan in America, where even now a celebrated billionaire businessman like Warren Buffet remains a big fan.

In the UK tax credits have become widely discredited because the cost has apparently mushroomed from £1 billion to £30 billion a year which does sound crazy if the intention is to provide a 'hand up' to those the bottom need of the income scale.

So instead of a false debate about whether the UK should have a system of tax credits, surely the real issue is about the length of time these benefits can be claimed and how far up the income scale they should be paid.

As I said in a previous post, the 'sunshine of socialism' in Scotland enriched middle income earners compared to their low paid colleagues over public sector pay policy in 1999/2000 - could it be that something very similar has been happening over tax credits?

 

http://moneyweek.com/merryns-blog/the-truth-about-tax-credits/#comments

The truth about tax credits



By: Merryn Somerset Webb

A part-time worker on tax credits can take home as much as a junior doctor

We published an article by James Ferguson a few weeks ago pointing out that it is entirely possible for a family on tax credits to work very few hours a week but still take home an income similar to that of a junior barrister or doctor. Several readers have taken issue with this.