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.
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.
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.
Personally, 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.