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http://moneyweek.com/merryns-blog/the-truth-about-tax-credits/

We go on about tax credits a fair bit on here but here are a some nice tables of children vs effective gross income. e.g.

For one parent working 24 hours a week, minimum wage with three kids, equivalent gross = £40,500.

For two parents, working 35 hours a week, minimum wage with three kids, equivalent gross = £39,500

There are other examples where working 70 hours a week (2-people) gets you a lower effective gross income than one person working 24 hours a week.

I think these table even underestimate the benefits of less work e.g. The credit-claimers get free dental, the 70 hour workers pay higher commute costs and student loan repayments.(if gross pay above threshold).

I used to get angry about this, now I am just sad. I used to be motivated to do extra work, now I just turn down opportunities,. No wonder productivity is low, it's just not worth doing anything if you don't get to keep the results of your labour.

I'm lucky with a very short commute, easy job, salary sacrifice as much as possible with the aim of working part-time asap. Time for me to join the 24-hour club.

Maybe those figures above show we already have a citizens income. It doesn't matter what you do, the state allocates you £40K effective income with 2 kids.

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I really struggle to understand why the narrative in the press w.r.t TCs is what it is. Why aren't these sorts of examples more prevalent, especially in the Tory press? Why is it always about how much people will "lose" and not about the, frankly, ridiculous sums they are getting from the system? How does anyone think this is sustainable?

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Council tax and housing benefit make up a large percentage of those figures. However, if you have assets above £16k you will not be eligible for HB or CTB,

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Benefits get spent into the economy, create demand and employment. I don't think the Tories have thought this through. They want a higher minimum wage while at the same time implementing policies that will cause the economy to contract.

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Anecdotal - I know a couple with 4 kids. They spit up 6 months ago. She kept two kids, he got two. He just got a nice (1 year old) 3 bed council house and she obviously stayed in the existing council house.

Over £70k between them now. He spends half his week fishing. Nice stress free life if you can get it.

These people are the reason that I actually started researching the whole tax credit issues. Until then I was as ignorant and blase as most people seem to be. I wish I hadn't investigated now. Ignorance was a kind of happy bliss.

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So that's why the scummy mummy with 2 kids hardly ever seems to leave to go to work & can afford rent & drink ups every day on our road.. Cut the whole lot and I'll be a gent and drive her back to the council estate..

On a serious note.. It has nothing to do with sending kids into child poverty argument that Brown so eloquently put today.. if you saw how these kids from these poor parenting, 'seemingly' low paid family's acted in schools you'd realise why they will always see work as a fools way to live. They have free education on a plate and don't take it, yet I know of peers from terrible backgrounds who have played the cards they were dealt and are now paid handsomely yet believes kids are expensive for what? Oh wait.. For little Jimmy with 2 gcse's at McDonald's to pop one, two or five out with his Jeremy Kyle bird and take home just as much?

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Benefits get spent into the economy, create demand and employment. I don't think the Tories have thought this through. They want a higher minimum wage while at the same time implementing policies that will cause the economy to contract.

Firstly the government needing to prop up an economy via handouts is a sign of a poor economy & secondly If tax credits are removed and wages don't rise to meet the shortfall costs will have to fall..

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I'm lucky with a very short commute, easy job, salary sacrifice as much as possible with the aim of working part-time asap. Time for me to join the 24-hour club.

Can't argue with that. The old me 6 months ago might have done, but having seen wtf is going on, my view has completely changed. For those workers actually able to earn more than someone on TC's then there is a point in working full time. For now. The original point to me was to take a 30% hit on my pension, take it early at 55, and be completely self sufficient from then on. Now I realise I'd be a mug to do that and a financially beneficial route would be to keep the pension deduction free, take it much later, and instead see what benefits are available to me for minimal hours/effort. I'm all for the welfare state as it was originally intended, but as we have this cluster instead, I'll be making sure all my sources of income are (legally) outside of tax too. That's a tragic state of mind, but that's what happens when meritocracy goes out the window.

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Benefits get spent into the economy, create demand and employment. I don't think the Tories have thought this through. They want a higher minimum wage while at the same time implementing policies that will cause the economy to contract.

You have a high post count and you criticise Gordon Brown in your sig, so how can you be so ignorant of a tenent of economics, the 'broken window fallacy'?

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You have a high post count and you criticise Gordon Brown in your sig, so how can you be so ignorant of a tenent of economics, the 'broken window fallacy'?

But a tenet of whose economics? The broken window fallacy isn't infallible! Without expending a great deal of effort, it could be argued that if these benefits weren't given out then the reduction in public expenditure may be either otherwise wasted, e.g. tax cuts to those who don't need them causing an excess of unproductive savings or further asset price inflation.

I'm not a fan of tax credits but throwing out the broken window fallacy as a rebuttal isn't going to win the argument.

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This is the problem and i think it's what the Government are most concerned about, now the Tax Credit genie is out of the bottle and people talk (especially when they are losing jobs in a recession) what is hapoening is more and more people week by week are going down the tax credit route, all those job losses you hear about? 60% will probably try and get on the tax credit gravy train.

I don't blame them, but i want it stopped.

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Also ignores the fact that if you have a stressy job it might not be deemed worth the hassle to actually go and claim some of your entitlements. Fancy filling out an HMRC form for a few hundred quid/annum after a 60 hour work/travel week? Can understand if people just ignore it and spend time doing more worthy things.

The extent to which the country is willing to ruin people in order to maintain house prices is staggering.

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Also, this prevents the proles from seeking a better life. Why make the effort when the state will pay to keep you in the lower echelons?

I'm glad I made the effort and didn't take the easy penny. I'll get the benefit of a marriage and a long career doing something I enjoy to take with me when the kids fly the nest.

There's more to life than the number you look at at the end of the month.

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Benefits get spent into the economy, create demand and employment. I don't think the Tories have thought this through. They want a higher minimum wage while at the same time implementing policies that will cause the economy to contract.

That is a crass argument. There is an element of truth in it, but it is really messed up.

Lets state that argument in another way:

Non pension benefits in the UK are £100B (say). All this goes into the economy, but there are side effects - eg, people might not work as hard as they could, which reduces the wealth the UK can offer the world in exchange for their good, and reduces growth which would (might) help today's workers when they retire.

So lets reduce the benefits bill by half - any benefit you get after the crossover is 1/2 what it is now. That would hurt. Those individuals would spend less, etc, affecting shops etc.

But let's instead spend that £50B we've saved, on building UK infrastructure, helping innovation in the UK, supporting UK higher education. So the money will still get into the UK economy, just not through expenditure by the poorest in society, but rather through expenditure by those workers on those products (well, education might be reduced loan payments by graduates, but same effect). Kind of the same effect (the money gets spent in the economy) - BUT - in this alternative expenditure model the UK also gets £50B investment in infrastructure, future growth, jobs, etc.

Now, I might say that I'm happy with the provision of benefits to the poorest in society - but looking at these examples a hardly-working family with 5 children could be pulling more after tax than I make flogging my ass off. And I'm trying to employ people, make growth for the UK, blah, blah, blah. Perhaps I'd like to have 5 children but I can barely afford the two I've got, etc, etc.

Maybe we should reduce the benefits bill, maybe we shouldn't - but don't string up the argument that it is good for the economy because it isn't.

Anway, rant over, what I'd really like to know is how common are these figures. In Wiltshire, say, out of all 'family units' how many are on 10K salary + 50K benefits vs 50k salary 10k benefits. I'd like to think that the 10k salary + benefits to give 50K equivalent are very rare, but I just can't tell. Oh, they say something like 'only 2500 currently get more than 25k in benefits' or something, but what is the distribution - how many would be on 20k, 15k, 10k, 5k, etc.

Edited by dgul

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It has been this way for some time now. The greatest benefit to a tax credit existence is the time that you save, which you would normally slave away for somebody else. You can spend it learning, hobbying, or just having fun, or a bit of each. Spend more time with loved ones. You can earn money on the side quite easily. Surely that is how life should be spent anyway. I would argue that wanting to work 40 hours or more for somebody else to profit, commuting, getting back from work knackered and no energy for anything else ... is no longer considered noble or respectable but sheer madness when there is free money being handed out like candy. It seems like every culture apart from the British are attracted to it and see it for what it is, and know how to milk the system to their best interests.

What the numbers in OP's post haven't factored in... is the cost of working... cost of clothes which wear down much faster, cost of transport and petrol, parking charges, cost of maintenance of a car or bike, childcare, cost of medicine for the increased amount of colds and conditions you get from commuting and being around different people all day, and then there's the increased amount of food you have to consume, you DO eat more when you work more. Phone bills, internet bills, cost of using a shower more, smelling nice and staying well groomed. Gifts and cards, Birthdays, Christmas, and so on. That is just one side of the coin, there are numerous benefits and privileges that are afforded to you and your children for being on welfare. For some people, if they added it all up and did the math they would feel absolutely shafted.

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But a tenet of whose economics? The broken window fallacy isn't infallible! Without expending a great deal of effort, it could be argued that if these benefits weren't given out then the reduction in public expenditure may be either otherwise wasted, e.g. tax cuts to those who don't need them causing an excess of unproductive savings or further asset price inflation.

I'm not a fan of tax credits but throwing out the broken window fallacy as a rebuttal isn't going to win the argument.

You beat me to it.

It's a dangerous assumption that prices would automatically fall when we now reside in globalised markets.

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This is one big reason to thank the EU. The fact that a Bulgarian family can come to the UK, and one of them can work 2 days a week in Macdonalds, but get family income equivalent to that of a lawyer, all paid for by UK taxpayers will finally get under the skin of Cameron and his mates. He will have to reduce these subsidies for everyone. Unfortunately, the real beneficiaries (Btl investors) will squeal. They don't care about the origin of their tenants so long as the taxpayer is paying off their mortgages.

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This is one big reason to thank the EU. The fact that a Bulgarian family can come to the UK, and one of them can work 2 days a week in Macdonalds, but get family income equivalent to that of a lawyer, all paid for by UK taxpayers will finally get under the skin of Cameron and his mates. He will have to reduce these subsidies for everyone. Unfortunately, the real beneficiaries (Btl investors) will squeal. They don't care about the origin of their tenants so long as the taxpayer is paying off their mortgages.

Obviously the cost of living and society's true parasites need dealing with first.

We need to take excuses away, not add to them. There's no excuse not to work if employment is plentiful and pays for decent shelter and basic lifestyle. The same things boomers took for granted when they started out and are now intent on denying others.

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why did not say this to the face of that women on question time a few weeks ago.

why is it fair that you work 16hrs and get the same as someone who is working 40hrs

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Quite a few people in my workplace on tax credits only work 20 hours a week and refuse to work any more despite plenty of overtime and even full-time permanent contracts being available.

Edited by mike74

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why did not say this to the face of that women on question time a few weeks ago.

why is it fair that you work 16hrs and get the same as someone who is working 40hrs

Are you sure it was only 16h in her case? She said "I work bloody hard", lol

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Quite a few people in my workplace on tax credits only work 20 hours a week and refuse to work any more despite plenty of overtime and even full-time permanent contracts being available.

So correct. My colleague is on a sort of flexi time. Minimum 30 hours per week but in the past she has done more when needed.

Some 'pub friend' pointed out to her that she lost so much it wasn't worth doing the extra hours. This October (our busiest month) she did 42 hours less than last October. Guess who had to pick up the slack?

I don't blame her though - she only lost about £120 but gained 45 hours free time. Blame the game, not the system.

It's not even like she really needs the money. She has four kids - one is 13 so the credits kick in, the other three are all over 18 and working so they all pay about 25% of their take home as 'house keeping' which doesn't affect TC's.

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