In this chapter we study three proposals with characteristics similar to those of a Citizens’ Income: a Negative Income Tax, genuine Tax Credits and a Participation Income.

Tax Credits

In Chapter 2 I described a Tax Credits scheme proposed by the UK's Conservative government in 1972. This was close to a genuine Tax Credits scheme because it allocated a credit that was paid out if there were no earnings, and was withdrawn as earnings rose, up to a breakeven point, after which Income Tax was deducted. We noted some disadvantages to this particular scheme: for instance, that workers earning a low weekly income were not included in the scheme, and non-earners were not included either. There is no reason why an alternative Tax Credits scheme should not include every citizen from the date of its implementation, so the particular problems did not relate to the idea of a Tax Credit.

Some disadvantages of the Heath scheme, though, would be experienced by any Tax Credit scheme. For someone employed, the Tax Credit is reduced as earnings rise, so either the Credit has to be administered by an employer (which causes problems as workers move from one employer to another, and also means that the employer needs to know the worker's personal circumstances in order to work out their entitlement), or the Tax Credit has to be paid by a separate government agency which will then need to know the worker's earnings and every change in those earnings (as the Department for Work and Pensions does for ‘Universal Credit’). Neither solution would make for easy administration. If the former method were to be employed, then if someone experienced a period of unemployment between two employments, the administration of their Tax Credits would pass from the employer to a government agency and then back again. This would not be a good recipe for seamless administration.

It rather looks as if Tax Credits are designed for a world of longterm full-time employment. The Heath scheme was also designed for a world of stable families. The level of the Tax Credit depended on whether someone was married, so changes in personal circumstances would not only have affected the level of the Tax Credit, but would also have been known to someone's employer.