Tax and benefits

[tobyaw]

There is a furore (among the media at least) over the government’s plan to stop child benefit where at least one parent is a higher-rate tax payer. I think it is a progressive reform that should be welcomed. I find it hard to justify universality of benefits; those with high incomes should not be receiving cash from the state, if for no other reason than that it must be highly inefficient for the government to take money away from us in tax only to give a fraction of it back as a benefit.

I would take the principle further, and state that nobody who pays income tax should receive cash benefits, just as I think that those who live on benefits shouldn’t have to pay income tax.

Perhaps a little more awareness of how much tax we pay would help those complaining about the change to put it in perspective; for most taxpayers the child benefit they receive is dwarfed by the amount of tax that they pay. PAYE does a very good job of hiding one’s tax payments; the money doesn’t reach one’s bank account, so one doesn’t miss it.

Years of writing my own PAYE and VAT cheques has made me very conscious of exactly how much money the government takes from me. I think that as a nation we’d have a very different attitude to the level of government spending if we had to pay income tax out of our own bank accounts.

Comments

[ioevri1.livejournal.com]

My point exactly. My parents income shouldnt matter when I no longer lived in there home. I was on my own, paid my own taxes, yet got denied based on their income--not my own at the time. It was very frustrating.

Long overdue

[houstonjames.livejournal.com]

I agree there - your benefits, student loans really shouldn't be calculated depending on your parents' income - but that isn't an issue here; the "controversial" change (actually supported by 80+% of the population, but the media seems to want to pretend there is a controversy) affects a benefit which is paid to the parents - currently paid regardless of their income. Right now, every parent gets this welfare payment simply for being a parent, regardless of income, which just seems wrong to me. If this benefit actually went to the child, like the 'Child Trust Fund' payment, there would at least be a reasonable argument against making it dependent on the parents' income, but that isn't the case here.

Indeed, at first my mother had assumed she wouldn't be eligible (my father had a well-paid job with AMI, a big US health care company, at the time) - the notion of having the government hand out welfare while it also extracts a much larger amount of money from the same pocket in tax is just absurd on so many levels.

The other proposed reforms seem very positive (as well as long overdue): capping welfare payments at a figure which is still outrageously high, and changing policies to avoid the "gap" whereby a welfare recipient can be better off staying on welfare than taking a job. It will probably take years for this to have a detectable effect overall, but it's certainly a step in the right direction. It's far from ideal - for one thing, joint tax returns would really need to be in place for this to work properly - but it's going in the right direction at least.