Taxes and Benefits

"I may be an arrogant thieving fuckwit, but you, sir, are a rich prick" *

Transitioning to work for beneficiaries and the low-paid has been bollocks-ed up by the tax credits that governments pay these folk. It leaves them facing very high effective marginal tax rates.

In response to a post by Mr Vindico on welfare reform:

http://vindicovindico.blogspot.com/2008/02/ok-one-more.html

I wrote (numbers changed for NZ$):

How about this?

Make benefits tax-free.

For all other taxable income, the first $35k (hello, Sir Robert Jones) tax free, 30% thereafter.

Beneficiaries, however, have a special tax code that tax their income at the normal rates (zero to 35k) PLUS 30% "benefit payback" to $15k, 40% payback to $35k and 10% thereafter.

I have no idea what a benefit is worth, but the tax code could indicate to the payroll clerk how much maximum payback is. E.g. if you are on benefits worth $250 per week, then your tax code would ensure that you payback no more than $250 quid each week (tax code of "B250").
The normal entitlement rules apply to the benefit (again: I have no idea what these rules are for the various benefits), so if you are on a sickness benefit, you could start part at work part-time as you begin to get better. Once you are back full-time and no longer eligible, your benefit stops and your tax code reverts to normal. You would likely have been paying all of the benefit back anyway if you were earning more than $769 per week ($40k pa) back in your job.

I think, (but have no expert knowledge in this area) that it might aid transition back to work for beneficiaries, as they face a marginal tax rate of 30% or 40%.

It would also allow those who receive benefits for permanent illness, disability or injury to work part-time (where possible) in a simple manner. E.g., no forms to fill. You could work different hours each week, depending on how able you are that week: your "B" tax code takes care of the rest.

Okay, so I included a bit of income tax reform in there, too. And it would require all the bollocking tax credit thingies be converted to a benefit. Would that mean bringing back family benefit of $x per child per week? That would also be added to the "B" code max amount. I’ll have to think further on this…



* This refers to his desire to get his socialist hands all over my pay-packet, allegedly to help the poor and oppressed. But instead, he and his cronies go and spend it on BMWs and quangos. I do not mean to imply he is a thief in his personal life. Please don’t sue me, you cunt.