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

[Francis Irving]

On Mon, Oct 04, 2010 at 12:46:35PM +0100, Julian Todd wrote:
> theo:
> >It depends on what you think the fair rates of tax should be.  If you
> >think a fair rate for high earners is 40%, but actually after benefits
> >they end up paying 39% net, you might think they should pay more.  If
> >you're happy with the high rate being 39% then I agree with you.
> >(Obviously these numbers aren't accurate, but you get the principle.)
> 
> Another boundary issue here.  Say my mother is on £38k.  "It's a
> disgrace I am taxed at 40%", she proclaims.  But actually her tax bill
> is:
>     (38000-37400)*40% + (37400-6475)*20% = 6425
> which looks a lot like 17% to me.  What was the problem again?

For the record, since I've just read a million comments totally
confused by this, if you earn £38k then you are not a higher rate tax
payer.

You have to earn £6,475 (your personal tax free allowance), and then
£37,400 (the amount taxed at less than 40%) = total £43,875

http://www.hmrc.gov.uk/rates/it.htm

Also the whole calculation is rubbish if you don't include National
Insurance, which is an income tax.
 
> I guess we could test this with a simple public poll.  The government
> wants to cut taxes.  Which is better for you:  Taking the 20 to 19 or
> the 40 to 39?

Interesting. If Iain Duncan Smith gets his combined tax / benefits
system, then perhaps we can more easily tell people those numbers.

http://conservativehome.blogs.com/thetorydiary/2010/10/by-paul-goodman-matt-sinclairs-recent-report-for-the-taxpayers-alliance-is-an-excellent-guide-to-the-problems-of-welfare-refo.html

Such a system would also let the Gobernment correct the unfair anomaly
in the new Child Benefit rules that Donny pointed out.

Labour, rightly cautiously until they see the detail, are saying they
may back the reform:

http://www.guardian.co.uk/politics/2010/oct/01/labour-support-universal-benefit-credit

Francis