Forget child benefit what we need is a simpler tax system
The furore over abolishing child benefit for higher rate taxpayers shows how difficult it is to make changes to the benefits and taxation system.
The government has chosen the ÃÂ£44,000 individual limit to cap child benefit because it is simple and easy to manage. Go into the higher rate tax band and you will no longer be eligible for child benefit.
It is however manifestly unfair that a couple jointly earning ÃÂ£80,000 would still be eligible for the benefit because neither has an income in excess of ÃÂ£44,000, especially when the objective of this exercise is that coalition buzzword - fairness.
I've long held the view that our taxation and tax credits system is much too complicated. And because it is complicated it needs and army of bureaucrats to administer.
The coalition is finding that tinkering with the benefits and tax system is very difficult.
What is needed is radical reform and a simplified tax system.
As part of a simplified tax system benefits like tax credits and child benefit should be scrapped and instead a series of tax discounts should be introduced. So for instance instead of giving child benefit why not give a tax discount per child on a sliding scale so that those earning the most get nothing, while giving more of a discount to the poor.
A similar system could be applied to winter fuel allowance.
National insurance should also be abolished and merged into income tax. It has suited governments of all colours to pretend that raising NI was not a tax rise, but it always was. A fair system should also be an honest system.
It would also make sense to give couples (not just married couples as the coalition wants to) the choice to pool their incomes for taxation purposes.
When everyone is told that they will need to make sacrifices it makes sense to introduce sweeping reforms to the tax system that might not be politically possible at another time.