Agenda for the 21st Century
Child Support Agenda for the 21st Century
Parents should have equal status by default
Partners should know about paternity
All children should have been accepted children
Eliminate sex discrimination from child support
There should be no Treasury saving or state compulsion
Child support should be formally awarded to the children
Use a formula to determine the amount
Have closer ties between child support administration and family courts
Use a symmetrical formula that treats both parents similarly
Household benefits/credits should not be treated as income
Amounts should relate to spend on children, not wealth
Also - Exclusions from the Agenda for the 21st Century
Also - A method of judging proposals
Also - International Agenda for the 21st Century
Related topic - Can Child Support Agencies ever work?
Related topic - The 21st Century is making the reformed scheme obsolete
Home & weblog
Blog archive & site history
Site map & search

Household benefits/credits should not be treated as income

Under development

What?

The rule should be: don't attempt to treat tax credits as net income. (This would apply to all current & future tax credits). But if the household receives any tax credits, operate the "basic rate" (15% / 20% / 25%) at all income levels.

Then if & when tax credits become available for all low earners, even those without a family (perhaps 2003) - remove the concepts of "flat rate" and "reduced rate" for low earners from the child support formula entirely! In other words, try to make the whole scheme vastly simpler than it is. The positive way of presenting this would be: "the child support formula is 15% / 20% / 25% - but if the household doesn't receive a tax credit, there is a protection mechanism for low earners based on a "flat rate" or a "reduced rate"".

Why?

The current scheme, and the reformed scheme, both provide incentives for non resident parents to behave in ways that are not in anyone's interests. This includes:

  • splitting up with their new partners;
  • giving up work and letting their new partners earn the household's money

How?

The rule could be:

  • Don't attempt to treat tax credits as net income. (This would apply to all current & future tax credits).
  • But if the household receives any tax credits, operate the "basic rate" (15% / 20% / 25%) at all income levels. (So ignore the concepts of "flat rate" and "reduced rate" in these cases).

Then if & when tax credits become available for all low earners, even those without a family (perhaps 2003) - remove the concepts of "flat rate" and "reduced rate" for low earners from the child support formula entirely!

In other words, try to make the whole scheme vastly simpler than it is. The positive way of presenting this ("spin"!) would be: "the child support formula is 15% / 20% / 25% - but if the household doesn't receive a tax credit, there is a protection mechanism for low earners based on a "flat rate" or a "reduced rate"".

References

Relationship to other Agenda items
   
Other pages in this web site
Problems when the NRP's household claims Working Families Tax Credit  
Should Working Families Tax Credit be included as NRP's net income?  
Suggested alternative to treating tax credits as NRP's income This is the real proposal.
Case Study 1 - Removing the incentive for the NRP to work WFTC is being paid for a child that the NRP isn't financially responsible for, and affecting his payments to a child he is financially responsible for. There is suspicion and resentment that in stage 2 above money intended by the government for the new partner's child is being diverted to a different child. The formula may be justified, but it appears to the people concerned to be arbitrary and unfair.
Case Study 2 - Bizarre child support changes as the new partner's income changes In this case, the NRP earns the same amount throughout. But the NRP's new partner manages to go from earning less to earning more than the NRP. The NRP's child support liability plummets as a result!

As far as the PWC is concerned, the NRP's household, and hence the NRP, has become better off (even though this is not the result of the NRP's efforts). The PWC may expect the "children to share in the wealth of their parents". Instead, the child support received falls to less than half!

By earning more than the NRP, the new partner has removed all of the WFTC as a source of income for the NRP, so that it is not used in the child support calculation. This will surely become an avoidance tactic in the reformed scheme.

Case Study 3 - No incentive for the NRP to earn more The real conclusion is that having big steps in the formula such as the 0% / 50% / 100% contributions of WFTC to net income screws people up to an incredible degree. It is incompetent legislation to make such a small change in circumstances have such a big final outcome. It can only cause resentment, and cause people to behave badly. Who, in Arnold's situation, would even bother? Why shouldn't Arnold say "stuff it, why bother to try to earn more?"
Potential lobby groups
NACSA  
Other relevant external links
   

Today's forecast:
"Partly rational with brief periods of coherent thought giving way to complete apathy by tonight".

Page last updated: 5 July, 2004 © Copyright Barry Pearson 2003