The alternative to transferable tax allowance (or similar fairer family taxation) is discrimination

Posted in: Your Views: What Parents Say

18th October 2015

The Women’s Equality Party came out against the transferable allowance today. They are wrong. They are wrong because they’ve reacted against the word ‘marriage’ and failed to grasp that this isn’t about anything ‘extra’ at all.  Neither is it about special treatment for some. It’s not even about marriage (although it’s perfectly understandable that a legally binding document of some kind should be required, whether civil partnership or marriage). 

Eradicating ‘the penalty’

Crucially the principle of a tax allowance is about eradicating a hefty and unfair tax penalty against families when one parent’s primary occupation for a period of time (however long or short),  is invisible care work looking after children. It’s about restoring equity and fairness and eradicating discrimination, so that all roles in a family are equally acknowledged for their value and so that all families are treated equally across the board. 

Would members of the Women’s Equality Party expect to pay a penalty in taxation just because the shape of executing various family responsibilities in work and care is deemed somehow less worthy of fair treatment?   Would they expect their children to pay a heavier price for having a parent take care of them for a while, instead of a registered practitioner?

WEP probably don’t realise that on the household income ‘X’ a one-earner family accessing just one personal allowance typically pays almost twice the amount of tax compared with another family with two earners. This can amount to hundreds of pounds per month more tax, even though the main earner is supporting two adults and children on one income. 

All families should access two personal non taxable allowances

The principle of enabling all family units to access two full personal allowances – rather than losing one allowance completely –   should apply to all families (with children)  of any shape or size, reflecting the twists and turns of the family life cycle.  It makes little sense that the ones that miss out the most are families where household income is already considerably reduced because one parent needs (or prefers)  to divert time to care-giving within the family home.  Or perhaps he/she works part time around school hours or doesn’t earn enough to make full use of their personal allowance and it therefore gets ‘lost’.  

Two full personal allowances should be protected for every family, so that they are taxed as a family unit,  if they want to be, reflecting the teamwork that being a family is all about.   And it can work for lone parents too, because it’s perfectly possible for an extra ‘share’ to be allocated to make sure a lone parent doesn’t miss out.  It only takes a bit of imagination to come up with a system of fairer family and household taxation for all, regardless of size and shape.  The important thing is that families are not penalised for staying together, living together and working it out together when bringing up children to independence.  And for a lone parent the point is to recognise the difficulties of raising a family alone when extra help might need to be brought in – often at a cost. 

It makes little sense to oppose a transferable tax allowance, whatever name it is given, unless you believe that raising children and taking care of them should be heavily penalised in tax!  

No more penalties for caring

Furthermore it makes little sense for a party that purports to stand up for women to collude in a tax system which discriminates against caregivers, who are often women.

Oppose a measure for using the word ‘ marriage’  in the title   –  fair enough.   Marriage is not for everyone and some have had bad experiences associated with marriage.  The underlying principle is the need for fairer family taxation for all.  It’s about restoring equity so that family care responsibilities for dependents are properly recognised across the board, and so that the caregiver’s loss of income doesn’t get exacerbated further by loss of a second personal allowance leading to an unfair family tax penalty.

Recognising the costs of bringing up children…

It isn’t a gender issue.  Of course the care-giving parent who  stands to lose the personal allowance most of the time is usually the mother, but it could equally be the father if he’s the one providing most care (this is obviously for parents to decide between them).   In any case the extra household tax paid when one allowance is lost affects everyone in the family – the carer, the earner, the children.   It means there’s a lot less money to go around to pay household bills.

One of the reasons why the transferable tax allowance is needed for parents (married/civil partnership and arguably co-habiting too,  when raising children together) is that our current, extremely individualistic, tax system means they currently face a family tax penalty just at that crucial time when they need this punishment the least –  ie when raising children.   It’s not just about the care element.  It’s also about extra food, clothing and other essentials, not just in the baby years but also when children are older.

 …..for however long it takes

It could be that one parent is at home taking on the bulk of care responsibilities for just a year or so.  Or they could be living on just one main salary for much longer, according to personal circumstances….for example if one parent works long hours or works abroad, or there are no available flexible jobs in the local area, someone has lost a job,  or a child has additional needs.

Respecting family diversity and equal treatment for all ….

It could also be the case that one parent needs to look after elderly parents, so he/she makes the decision to divert time from paid work to unpaid work.     As WEP themselves point out,  families come in all shapes and sizes.  What families do – and the challenges they face – also vary enormously.  All shapes.  All sizes.  All trying to balance work and care in the way that suits them best.  It should not be for the state to somehow be social engineers coercing people in a certain direction.   And we don’t expect a party about ‘Equality’  to back more favourable arrangements for some than others.

 Restoring a level playing field 

 At the very least families should have a level playing field.   Why be treated more generously in tax just because couples bring in two incomes from paid employment,  and use registered childcare,  rather bringing in one income and providing childcare at home?  

So , to recap,  it’s a general principle that no-one should be taxed when they don’t earn enough money to support themselves and their dependents  – and that’s why we’re all allocated a personal non taxable allowance in the first place.  The threshold has gone up in recent years and now stands at  £10,600.  Unfortunately,   when you are not earning at all due to care responsibilities for dependents,  then a family finds themselves unable to access this much-needed second personal allowance.  This is perverse when dual income friends without children are allocated two personal allowances despite having no additional care responsibilities.  

Dual income working parents bringing in two pay cheques have fortunately always accessed two personal allowances and also get other relief on their replacement childcare.  Furthermore the childcare sector is heavily subsidised by taxpayers to the tune of around £7 billion.  The system is skewed in their favour ( although no-one doubts that all families are struggling to make ends meet, particularly when both parents are on low hourly rates of pay). 

A tax allowance restores fair treatment to one-earner couples

So this leaves only the single earner couple (with one adult caring for children) out in the cold. They face a much greater tax bill pound for pound on the same household income as their friends.  Often they pay almost twice as much tax ( a tax ‘premium’)  despite sacrificing one entire salary.   The fact that the working parent ‘s pay has to stretch to support another adult and children is conveniently ignored.   It’s currently a ‘lose-lose’ situation for the single-earner family.   Not only are they penalised,  but they are vilified as being not aspirational enough and for not sending the potential second earner back into more paid work.  The fact they pay most tax relative to household income is rarely mentioned.  The fact that someone is busy caring for dependents is rarely mentioned either, nor the fact that they’ve put aside their own earning potential to provide family care instead because this is of immense *value*.

Misleading to have term ‘marriage’  in the title when it should be ‘fair family taxation’

Married couple’s allowance is the wrong name for it.   After all,  not all married couples are eligible for it anyway.   It’s for civil partnerships too,  so you don’t have to be married. If you’re married but earning too much , then you don’t get it anyhow.   And if you don’t have children you probably don’t need it, married or not. There’s a clear case for restricting it to people with dependent children.

 UK out of line with other countries that recognise family care work

Should it be given to co-habitees?   Well there’s nothing to stop people from signing on the dotted line to make it a legally binding relationship.  Perhaps everyone should be entitled to a civil partnership,  like in France where you can be ‘pacsed’. 

People who’ve lived in other parts of the world  know that most other countries allow couples to pool tax allowances – perhaps to access income splitting or a form of transferable double tax allowance in the child-rearing years.   The UK is way out of line, but at least we now have a partially transferable allowance.  There’s a lot more work to do to bring about ‘equity for families. A bit odd then that a party called the ‘Equality Party’   wants to instigate a backward step.  

When bringing up a family, every penny counts.  So why does WEP collude in making life even harder for families, rather than campaigning for fairer taxation?

Marie Peacock


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