Posted by Thomas Byrne on January 17, 2010 · 6 Comments
I had a passing discussion with Kerry Mccarthy about means testing child benefit yesterday at the Fabian conference and while she admitted that it could be seen as a waste of money the argument goes that if we are not going to stir resentment about the welfare state there must be a universal element – in this case child benefit.
I see this kind of argument quite a lot, and I can’t help but think that even if all the empirical results are as claimed (which I am dubious about), there is a great deal of insincerity on the part of lefties who ignore similar arguments from some quarters of the right.
There is no doubting that Iain Duncan Smiths plans for universal marriage tax breaks were a complete waste of money, but it is also true that it is families on the lowest incomes that suffer the most from family breakdown. Using the lefts logic, if we are going to stop this decline and cause of poverty an institution that is universal must be put in place as well – marriage.
I’m delighted that the party have moved away from IDS’s plans, and urge them to press ahead with reforms to child benefit to allow it to benefit the many – and not the rich few, and to as well constantly remind themselves of the problems with social engineering and not fall into the trap of combating it with their own kind – just as perverse.
Posted by Thomas Byrne on January 9, 2010 · 1 Comment
There is nothing wrong to suggest that we should have a tax system which would encourage relationships to stay together, we certainly need to remove the pressures that drive them apart. The prospect of financial relief each year won’t keep a truly rotten relationship going, but that not being there is proven to cause rifts over finances which push couples apart and council estates with father or motherless homes is testament to this – especially when their benefits or tax allowances will cease when they remain together. The Conservative Party is bang on when they suggest we attempt to keep the family unit together.
However policy proposed by Iain Duncan Smith completely fails to target the kind of people it is supposed to target – it targets rich families who aren’t suffering from the nuclear family breaking down, and fails to provide for those on low incomes. It is wrong however to suggest as there has been from some quarters from the left that to encourage stable relationships is to say that single parents are ’second class citizens’ if that were truly the case then the Labour party have made swaths of our society into those citizens. Are pub owners now second class citizens now they’ve been taxed to submission by the current government? Are smokers second class citizens when they launch ‘initiatives’ to encourage us not to partake in in? We as a party shouldn’t be ashamed to state that stable relationships lead to better outcomes in society, what we have a duty to do is find a policy that achieves this.
What we must do strengthen incentives to work, help to eliminate the ‘poverty trap’ and make low-paid jobs more economic – greatly increasing the chances of couples staying together not tinker with a series of complex allowances that many don’t even know how to obtain, never mind benefit from it.
Something for the CFJ to work on eh?
Posted by Thomas Byrne on December 4, 2009 · 3 Comments
The proposals to allow women who do not work to transfer their personal tax allowance to their husband are extremely flawed.
I agree with the principle being put forward by Iain Duncan Smith, but the means are wrong. Marriage tax breaks are much more important for the poor, yet this policy benefits the rich. And instead of changing tax boundaries, it’s tinkering with a system of complex allowances. It is unlikely that people who can’t afford accountants will even know about this, let alone know how to transfer their personal allowance across.
Lets work out the maximum saving. This will be where one partner earns just under £50k and the other doesn’t work. Its £2414.
The current personal allowance is £6,035. Basic rate (20%) applies from £0-37,400. Higher rate (40%) over £37,400.
Maximum saving will be where one partner (lets say the woman) does not work and the other (lets say the man) is able to use all of the woman’s personal allowance to reduce his liability at the higher rate. This will occur where the man earns at least 37400+6035+6035= £49470 before tax. That puts him firmly in the top 10% of earners. This will result in a saving of 40%*6035 = 2414
Let’s see what happens as we decrease incomes. If the earning partner earns £43k and the other does not work, the saving is £1212. This is a flat saving until the earning partner’s income drops to below £12070.
If the man earns less than £49470, then some of his wife’s personal allowance will be off-setting tax liability at the basic rate. If the man earns 37400+6035= £43435; then his taxed income is 43435-6035 = £37400; and all of his wife’s personal allowance will be off-setting tax liability at the basic rate, resulting in a saving of 20%*6035 = £1212. As you can see, the saving increases steeply as the man’s earnings approach £50k.
Let’s see what happens if both partners work. If one partner earns at least £6035, and the other does not earn more than £43435, there won’t be any saving at all. Most families won’t save a single penny.Working women already use their personal allowance. Lets take a fairly average family. The man earns the average salary, £31,759 (http://news.bbc.co.uk/1/hi/8151355.stm). After his allowance his taxed income is £25734. The woman is a working mother and works part-time earning £15000. There is no saving whatsoever from transferring the personal allowance across.
This policy completely fails to target the kind of people it is supposed to target – it isn’t rich families suffering from the nuclear family breaking down. This policy only helps where one parent doesn’t need to work or where the breadwinner is earning at least £43k – the top 10% of earners. It can be seen as a back-door way to take from the poor and give to the rich, and if we are be to taken seriously as the progressive force within Parliament we need to help the poor, not penalise them through well intentioned, but misguided schemes such as this. We need real plans to help poor families.
The proposals to allow women who do not work to transfer their personal tax allowance to their husband