One of the hottest issues in this era is the pending cuts on tax credits and the significant effects they will have on families in the UK. In order to understand what the cuts really mean, let’s look at tax credits, what they are and who benefits from them. Tax credits are simple mechanisms that ensure the redistribution of income to people who have low wages. The credits are usually classified into 2:
|Child credits - payments to families with kids|
|Working credits - payments to people with low incomes|
What Is the Importance of the Tax Credits?
This mechanism was made with only one purpose; to raise the living standards of people with low incomes. The tax credits aim at lifting families to reduce dependency on welfare as well as give people incentives to go to work. Initially, before the credits were introduced, welfare benefits were withdrawn soon after one got a job, regardless of the wage. Therefore, if the welfare was better, it was preferable to remain jobless. With the credits, low income earners can still get benefits to boost their income.