Tax credit cuts: a false economy
Giselle Cory
This blog originally appeared on Public Finance
If the Chancellor wants to help low to middle income households, he would be wise not to sacrifice tax credits, by far the most progressive way to help poor families
Seventy per cent of April’s new cuts to tax credits will fall on households in the bottom half of the income distribution band if the government goes ahead with proposed changes to working tax credits.
The cuts, announced at various points over the last two years and accounting for over £2.4bn in 2012/13 alone, are by far the biggest cuts to tax credits yet. Of the 2 million people on low to middle incomes currently claiming Working Tax Credits, all will be affected in some way. For some families, individual losses will run to several thousand pounds. Moreover, these cuts will disproportionately impact on households with children, as recently reported on by the IFS.
Is Osborne really about to give people on £100k a tax cut?
Gavin Kelly
This post originally appeared on Gavin's New Statesman blog
As we close in on the budget most eyes are still fixed on the fate of the 50p tax rate. Ignore for a moment some of the squeals from Labour on this issue (more in excited anticipation that it will be axed than horror) and spare a thought for the dwindling band of true Tory modernisers. Their two central ambitions over recent years have been to demonstrate an unswerving commitment to the NHS, and to show that they could govern the economy -- and tax policy in particular -- in the interests of the broad majority rather than the affluent elite. They are struggling to believe that having watched the coalition conspicuously squander the first of these strategic objectives that it could be planning to deliver the last rites to the second too.
Yet whatever the decision on the 50p tax rate, the heated debate over it risks obscuring another more nuanced, but still highly revealing choice facing Osborne. Who should benefit from the widely expected and costly increase in personal tax allowances: the vast majority of all tax payers, including individuals to over £100,000 a year (and indeed households on £200,000), or just basic rate tax-payers? An important issue in its own right -- and one which has been given new impetus by the coalition's travails over Child Benefit.
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