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What if we looked at tax credits as a subsidy?

What if we looked at tax credits as a subsidy?

There have been a wide range of expressed opinions about tax credits with the House of Commons and the House of Lords expressing theirs as well as the media and public.
It is not disputable that tax credits cost the taxpayer billions every year.  However, most of those who are receiving tax credits are taxpayers.  Taxpayers who want to work, who enjoy working but might need a bit of short-term assistance.
business-18061_640 (2)

The Government give out subsidies to businesses and companies through grants or tax allowances to assist them in the hope that by helping them, the businesses will grow and employ others as well as paying more back in tax contributions in the long-term.  Subsidies are an investment that will benefit society.  What if we looked at tax credits as a subsidy to benefit society rather than a welfare bill?

 

Let’s give some examples.

A woman was made redundant from a position in the clothing business that she had held for over 16 years.  After unsuccessfully searching for a replacement position and starting to run , she has two other choices – go onto unemployment benefit or use her contacts to start a business.  If she started a business, she wouldn’t be eligible for the unemployment benefit, free school meals or other assistance.  Moving to self-employment would also mean that there would be no guaranteed wage or income, so the safest option would be to stay unemployed and hope that a job application would be successful.
However, tax credits provide some income which would top up her fluctuating and low income from the business.  Tax credits would her to build her business so that, two years later, she would be receiving enough to be paying tax, maybe no longer receiving tax credits and possibly be looking at taking on staff.

Tax credits enabled her to move from unemployment to running a business, which benefits the tax system rather than taking from it.

Another example could be a single father of a two year old child.  Working full-time all of his life, he now finds himself struggling to manage the pressure of a full-time position with looking after his son.  In addition, the cost of nursery fees mean that he is financially struggling.

dad-909510_640 (2)So, with the agreement of his employer, he changes his hours to a shorter day of 9:00- 3:00.  The reduction of hours, means a reduction of income and he is now eligible for some tax credits to cushion the difference and allowing him to continue working despite finding himself as a single parent.

Tax credits enabled him to balance his responsibilities as both a parent and employee.  As he has stayed in employment, he will be able to increase his hours once his son starts school, reducing his tax credit payments and increasing his tax contributions.

20150914_125104Personally, tax credits enabled me to move from working in a fast food restaurant in the evenings to becoming a teacher.  Before tax credits, I was unable to work during the day because of the high cost of childcare.  However, with tax credits helping pay some of the childcare fee, I was able to get become a teaching assistant while I finished my Open University degree and then train to become a teacher two years later.

Over my ten years as a teacher, I have contributed more in tax payments than I would have done if I had stayed working in a fast food restaurant.

 

So, what if we looked at tax credits as a subsidy that will benefit society in the long-term?

If we invest and support working families through providing tax credits, they will repay that over the years to come and their children will see the value of working.

By investing and supporting working families, I believe that society will benefit.

8 Comments on What if we looked at tax credits as a subsidy?

  1. Mudpie Fridays
    January 13, 2016 at 7:51 pm (2 years ago)

    This is a well thought out post with a very key message, one which seems to get lost as soon as you mention tax credits and stereotypes kick in. I agree with you, we should focus on the long term benefits to the country and community as a whole, after all how many children have you helped work towards their full potential in the last 10 years! x
    Mudpie Fridays recently posted…Winter Bucket List for a 3 Year OldMy Profile

  2. Zoe Forde
    January 13, 2016 at 9:00 am (2 years ago)

    I normally am quite up to speed with UK politics, despite being Irish, but I’ve been pretty confused over the tax credits situation. Found this post really informative and helpful x

  3. Ickle Pickle
    January 12, 2016 at 8:25 pm (2 years ago)

    This makes total sense. Like most things, I guess there is a minority who abuse the system, and give ‘it’ a bad name. Kaz x

  4. Emma
    January 12, 2016 at 7:20 pm (2 years ago)

    Great exxamples and really thought provoking as many see these as a burden on society rather than the flipside. Well done to you too qualifying as a teacher amid all that family life.

  5. Bilna Sandeep
    January 12, 2016 at 5:15 pm (2 years ago)

    Living in a Tax free economy currently I am not much aware of the procedures and stuffs regarding the same.. but your article is definitely giving me a good insight on how this system works. Tax is one concern for us while we were considering relocating from UAE..We have been trying to get ourself acquainted with the systems from quite sometime..
    Bilna Sandeep recently posted…A buzzing Evening at the Kozhikode BeachMy Profile

  6. Miranda (Anosa)
    January 12, 2016 at 3:29 pm (2 years ago)

    These are some great examples you’ve given and I agree thinking of it as an investment in the future as well as investment in the tax system is better than thinking of it as welfare.
    Miranda (Anosa) recently posted…{Beauty Review} ASDM’s Hyaluronic Acid Serum My Profile

  7. Cathy (MummyTravels)
    January 12, 2016 at 1:16 pm (2 years ago)

    That’s a really interesting way to look at it. And I agree, there should be a focus on the long-term outcome and how that benefits people all round. I know from experience how childcare costs can have a massive impact on a family’s finances alone.
    Cathy (MummyTravels) recently posted…Seven reasons to go all-inclusive in AntiguaMy Profile

  8. Ana De- Jesus
    January 12, 2016 at 8:12 am (2 years ago)

    I definitely need to learn more about tax credits it is a tricky concept to master but will come in handy in the future. Thank you for the tips.

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