[wdmmg-discuss] child benefits for higher tax-payers

Donovan Hide donovanhide at gmail.com
Mon Oct 4 10:11:03 UTC 2010


Hi Julian!

While I agree it would be very useful for tax versus benefits across the
income spectrum to be visualised so people can actually understand the
ridiculously complex two-way flow of money I have some reservations about
what the Tories are doing.

The problem lies with the anomalies that get thrown up by assuming a single
source of income is a better judge of need than means-testing. A single mum
with a good job, paying £44,000+ in 2013 and three children will be affected
much more than a wealthy couple both earning £40,000 with the same amount of
children.

While I have less sympathy for the plight of anyone earning £44,000+ than
someone earning £10,000 on the minimum wage who has children, I think these
sorts of weird distortions will lead to increased bitterness amongst people.
The corolloray from this is that people (Tory voters) will later seek
"justice" in other areas of the tax system, be it pension tax relief or the
higher rates of income tax.

Having a child is something that should be supported. It is well proven that
means-testing is stressful, intrusive and a disincentive to claim. Therefore
universality is the best of a difficult choice. Honesty in the rich not
claiming would be the best alternative for me. Maybe a big box in the tax
return where higher rate payers justify why they claimed the benefit!

The only fair tax is income tax, rich people evade it on a grand scale. £120
billion/year I believe. £1 billion/year saved with the result of well to do
neighbours comparing their child benefit eleigibility is not a big help.

The most useful visualisation I can think of is comparing every saving in
government expenditure compared to what could be returned from chasing the
likes of Philip Green, "Lord" Ashcroft et al.

Cheers,
Donny.

On 4 October 2010 10:40, Julian Todd <julian at goatchurch.org.uk> wrote:

> The news from this morning:
>    http://www.bbc.co.uk/news/uk-politics-11464300
>
> It's a shame we don't have a graphic showing the distribution of
> payouts to the different household earning brackets lined up against
> the total income tax take on each of these households.
>
> I have got into frequent arguments with my grandfather who always
> thinks it's unfair for high rate earners to be able to claim this
> benefit, which they then spend on shopping.
>
> He should perfectly well know that the benefit effectively clawed back
> through their higher tax rates.  If you are willing to consider your
> net balance with the government (tax subtract benefits) then there is
> no apparent injustice in it.  And means testing this benefit causes a
> considerable bureaucratic complexity, as well as adding awkward
> boundary conditions.
>
> So I am pleased by the implementation, which is consistent with my view:
>
> Osborne: "People will be expected to declare on their tax returns
> whether they fall within the 40% and 50% tax brackets and the money
> will then be clawed back through the tax system... However, Mr Osborne
> urged top-rate taxpayers to stop claiming child benefit altogether,
> saying this would be the "most sensible" thing to do."
>
> Of course it can be interpreted as a tax rise in people with children,
> rather than a benefit cut.  The two are numerically the same.  But
> politically they are quite different.
>
> We now have a great example where we can test whether politicians
> choose either to educate us about the equivalence, or deliberately
> misinform the public about their equivalence to a political advantage.
>
> I am, however, deeply disappointed with the following soundbite the
> Chancellor is running with:
>
> "Mr Osborne said he expected the public to accept that it was not fair
> to tax someone earning £18,000 a year to pay child benefit to someone
> earning £50,000"
>
> Is there a chart showing total taxes and total cash benefits claimed
> (as well as population percentile) for each income range?  I mean I
> think the truth is the reverse.  The £50k earners are paying for the
> child benefits for £18k earners as well as the £50k earners.
>
> Julian.
>
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>
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