Latest news with #familybenefits
Wall Street Journal
7 hours ago
- Business
- Wall Street Journal
Americans Want More Kids. The IRS Can Help
In his op-ed 'You Can't Legislate Fertility' (June 24), Matthew Hennessey writes that 'encouraging people to start families is a job for churches and civil society, not the IRS.' But Americans rely on the tax code to make it easier to have the children they already want. Women in the U.S. report having, on average, one child fewer than they'd like. Programs like the child tax credit can help close that gap. The current credit has lost a fifth of its value to inflation since President Trump's first term. The reconciliation bill is Congress's chance to add that value back. Parents are essentially small-scale entrepreneurs: When they're empowered to take risks, everyone benefits from the payoff. Family tax benefits are pro-growth policy—like R&D credits, they help parents afford the start-up costs of a major investment in the future of their family and our country.
Times
2 days ago
- Business
- Times
A better paternity leave package would encourage take-up
Paternity leave rights in the UK currently run to a fortnight that must be taken within 52 weeks of a child's birth — and is paid at the rate of £187.18 a week or 90 per cent of average weekly earnings, whichever is lower. That is significantly below the national living wage and places a strain on working families. The current system also leads to many fathers and same-sex partners falling through the gaps, with the self-employed, those earning less than £123 per week, or those who have not yet been with their employer long enough being entitled to no paternity leave or pay. The shared parental leave scheme that was introduced in 2014 aimed to give fathers and other parents the chance to play a more prominent role in the first year. This scheme allows parents to surrender maternity leave and pay, and switch into the shared parental leave regime, so that up to 50 weeks of leave and 37 weeks of pay can be taken flexibly between parents. However, the uptake has been low. The complexity of the regime (which many employees and employers struggle to understand), the statutory rates of pay, and the fact that it effectively takes time away from the parent on maternity leave, all contribute to a lack of enthusiasm for the scheme. As a result, many, often larger, employers take it upon themselves to provide enhanced family leave and pay entitlements in a bid to support their staff and provide a more attractive array of benefits. Legal advice is often taken to ensure such policies are fair and non-discriminatory. A better enhanced statutory paternity regime would certainly improve the position for many families, particularly on lower incomes, and would undoubtedly increase take-up. While most people would agree with the idea that giving both parents more time with their families is beneficial, the real issue will be to work out how this is funded. Currently employers that qualify for small business relief can recoup the full cost of statutory paternity pay, and other employers can generally recoup 92 per cent of the cost. If paternity leave is extended and pay enhanced, it is unclear how much of the cost would remain funded. Businesses may well be concerned about the burden of additional cost and the pressures on resourcing that more prolonged absences would cause. Ultimately a balanced approach that considers the needs of families and the financial realities of business will be Wallbank is a partner at the law firm Freeths
Forbes
3 days ago
- Business
- Forbes
House/Senate Plans Boost Child Tax Credit, Not For Low-Income Families
A happy mixed race family of three relaxing in the lounge and being playful together. Loving black ... More family bonding with their son while playing fun games on the sofa at home The Senate Finance Committee has issued draft reconciliation text that mirrors much of the narrowly passed One Big Beautiful Bill Act (OBBBA) from the House. Both would increase the maximum child tax credit (CTC) and restrict eligibility among citizen children who live in families whose parents are not both US citizens. Neither would increase benefits for the 17 million children who live in families that receive less than today's $2,000 per child credit maximum —though Congress has options to do so. Increasing the CTC for very low-income families could also help offset program cuts elsewhere in the legislation that would affect these families. Both plans boost the maximum CTC The House bill would increase the maximum per child credit to $2,500 through 2028, at which point it would drop to an estimated $2,100. From that point on, the credit would be indexed for inflation. The Senate Finance Committee's draft would permanently increase the maximum per child credit to $2,200 beginning in 2025 and index it for inflation. In general, increasing credits to keep pace with inflation stops the erosion of benefits as prices rise. Adjusting the CTC for inflation would put this critical program for children on par with benefits for the elderly that already grow with prices. Under both proposals, the maximum allowable refundable portion of the CTC would continue to grow with inflation, as it has done since the Tax Cuts and Jobs Act (TCJA) of 2017. Rules that limit how the credit phases in with earnings would remain unchanged, so families with earnings in the phase-in range of the credit today would see no additional benefit from either proposal. Others would see a limited benefit if they did not have enough tax liability to offset with the higher proposed maximums. Proposed Child Tax Credit, Maximum Credit 2025-2034 Both plans add restrictions on mixed-status families Since 2018, the $2,000 CTC has only been available to children with Social Security Numbers (SSNs). When this TCJA restriction went into effect, about 1 million children no longer qualified for the benefit (but some did qualify for the smaller $500 credit for other dependents). Both the House-passed OBBBA and the Senate Finance Committee draft would continue this restriction on children and apply a new one to parents. Under the House plan, both parents of a child would need an SSN to claim the benefit while under the Senate Finance Committee draft, at least one parent would need an SSN. This new parental restriction in the House plan would eliminate an additional 2 million children from the higher CTC level, as noted in recent testimony by the chief of staff of the Joint Committee on Taxation. The Senate Finance Committee restriction would have a somewhat smaller effect. The House plan adds a new restriction on married couples who file separately Married filing separately is a relatively rare tax filing status that allows married couples to file their taxes on separate returns instead of jointly. Filing separately may render married couples ineligible for certain tax benefits including the earned income tax credit, credits that help pay for college (the American Opportunity Tax Credit and the Lifetime Learning Credit), and the premium tax credit and the child and dependent care tax credit. But under current law, married taxpayers who file separately can claim the CTC. The House plan would eliminate eligibility for the CTC for married couples who file separately (the Senate Finance Committee draft does not make this change). Requiring couples to file jointly may bolster the new SSN requirement in the House plan because it would prevent married couples with only one SSN holder from getting the CTC by filing separately. But it would also risk the credits of some survivors of domestic violence, who may become ineligible for the CTC (unless new legislation to change the tax treatment of survivors of domestic violence is adopted) as well as military personnel stationed abroad who marry noncitizens (as happened with stimulus checks). The House's plan means fewer children with SSNs would get the full CTC If the House-passed OBBBA becomes law, TPC estimates that in 2026, the number of children with SSNs who live in families that do not receive the full $2,500 CTC will jump from 17 million to over 26 million, more than 1 in 3 children in the US (Table 2). Primarily, it is because the credit's TCJA phase-in rules would remain. It's also because of the cuts directed at children with SSNs who have at least one parent that is not a US citizen: TPC estimates 500,000 children with SSNs would receive no benefit from the CTC because of the new restriction on these families and another 1 million will move from receiving the full credit to receiving less than the full CTC (up to a maximum of $500 per child as part of the other dependent credit). When more families cannot receive the full benefit of the CTC, the CTC is less able to reduce income inequality. Under both House and Senate plans, more low- and middle-income families would receive a partial credit, while their peers in all but the highest-income families would receive the full House and Senate have options to help more low-income families Research shows that increasing the CTC for low-income children and young children generates the greatest returns from this investment. My colleagues and I outlined several options, including phasing the credit in as soon as families begin to earn income (boosting the credit by $375 for most low-income families who currently receive the CTC) and phasing the credit in on a per-child basis, rather than per tax return (doubling the credit for many low-income families with two children). Both options would cost little relative to the proposed CTC expansion being proposed and would direct almost all of the additional benefits to families in the bottom one-fifth of the income distribution. The House plan and the Senate Finance Committee draft would both expand the CTC – but not for low-income families. Expanding the CTC to include more low-income families—including those with children who are US citizens—would be a sound investment in our nation's future.
Yahoo
28-05-2025
- Business
- Yahoo
Farage isn't the first leader to promise tax breaks for couples. They all failed
For decades, British politicians have tried and failed to solve the same essential problem: how do we make a fairer tax system for families? Nigel Farage on Tuesday claimed he had the answer. The Reform UK leader promised sweeping tax breaks for married couples in a bid to boost birth rates and make family 'a more important element in British life'. Estimates suggest it would save the average couple almost £2,500 a year in tax. Currently, workers pay 20pc income tax on earnings between £12,570 and £50,270. Under Reform's plans, one spouse would be spared from paying tax on the first £25,000 of income. It means a worker earning £50,000 would save about £2,500 in income tax. The party has already vowed to raise the tax-free allowance from £12,571 to £20,000, which estimates suggest could cost as much as £80bn. On top of this, it has promised to raise the higher rate threshold from £50,270 to £70,000, to release the millions more workers being dragged by stealth into the top rate band, shown in the chart below. If Reform delivered on all three promises, a worker earning £70,000 would be better off by almost £6,500. Such promises have predictably attracted backlash. Yesterday, the Conservatives accused Reform of 'fantasy economics' while the Liberal Democrats said the party was making 'huge unfunded spending pledges'. Yet, some economists welcomed reform to the UK's tax system, which they claim punishes single-income couples and makes it harder to start a family. Tom Clougherty, executive director at the Institute of Economic Affairs, said: 'I do think it is good tax policy. As things stand, two households with the same overall income can pay wildly different amounts of tax based on how that income is distributed between partners. That seems unjust.' Currently, families where one parent stays at home can pay thousands more in extra tax. This is because the breadwinner will pay a higher tax rate compared to a dual-income couple, where each spouse enjoys a tax-free allowance and the full benefit of each tax band. The think tank Policy Exchange has said that the UK has 'one of the least family-friendly' tax systems in Europe. It has called for families to be taxed on a household basis rather than on individual income. Ben Ramanauskas, of the think tank, said: 'This would be both fairer for families and make it easier for couples to have the number of children they wish to have, something that is increasingly important given our ageing population.' Various Conservative chancellors and prime ministers have tried and failed to launch bigger tax breaks for families. Ahead of the general election in 2024, the Tories pledged to raise the income cap to qualify for child benefit from £60,000 to £120,000 and said it would change the rules to assess household income, not individuals' income. Before that, Liz Truss wanted couples to be able to transfer their personal allowance – worth £12,570 – to avoid penalising families where one spouse stayed at home. Years earlier, in 1988, Nigel Lawson suggested giving couples a transferable allowance – but the proposal was shot down by Margaret Thatcher, then prime minister. In 2015, then-prime minister David Cameron introduced a marriage allowance letting one spouse transfer £1,260 of their personal allowance to the other, although this is not a significant tax break – saving only up to £252 in tax per year. To claim the benefit, the lower earner must have an income below the personal allowance and the higher earner must be a basic-rate taxpayer. Across the Atlantic, Donald Trump has promised a $1,000 'baby bonus' in the hope of boosting the birth rate. But such policies have had mixed success. Some experts question whether financial giveaways are the best way to support young families, although other countries such as South Korea and Hungary have successfully used tax reforms to increase the birth rate. Jason Hollands, of the stockbroker Bestinvest, said: 'Bolstering the tax benefits of being married might play a part in addressing this but needs to be considered against other options to help people have larger families, such as making childcare more affordable.' He added that there was no need to link the tax break to marital status if the goal was to encourage couples to have more children. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
