Maintaining the integrity of families: From Handouts to tax credits?
06 July 2012
Posted by: Stiaan Klue
nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen!"
These immortal words of Karl Marx will be upheld by some as the
epitome of what fairness means
"From each according to his ability, to each according to
Our progressive tax system that taxes the rich more and our
social welfare programs that redistribute wealth to the poor fit nicely with
However, as beauty is in the eye of the beholder so fairness is
in the hand of the legislator. What is considered fair is determined by the
amount of taxes government needs to collect to pay for its policy aims. You
might differ from government as to their policy aims and hence the fairness of
your tax burden – but we are nevertheless forced, and morally bound, to pay
The only thing that we can demand is that government should
spend taxes in the most effective and efficient manner. This will require that
collection and spending policies are aligned.
Opposing policy objectives: Tax collection versus social welfare
According to a report issued by a UK pressure group CARE
"The tax system does not recognise the family unit. It sees taxpayers as
individuals, regardless of their family circumstances. This is immensely
damaging to the social fabric of the country and must be addressed by an
This is also true in South Africa as our tax code does not
provide tax credits or tax deductions for married couples or families with
This policy seems at odds with the findings of the Department of
Social Welfare as detailed in their report "Towards a 10-year review of
the population policy implementation in South Africa (1998-2008): Families,
households and children”. In the report it is stated that the family is widely
seen as the core of society and it the main source of human capital
development. The study notes that it is the responsibility of government and
the wider society to empower and strengthen vulnerable families to prevent
their possible disintegration.
In response to this identified need, government uses a large
portion of its tax collection to provide services to needy families, including
social security (in the form of social grants), primary health care, free basic
services and free education. Assistance is surely needed as Census 2001
determined that there were 11, 2 million households in South Africa. About 33%
of households are living below the poverty line. Almost half of all families in
South Africa are headed by a single parent, usually a woman. These families
tend to be at a disadvantage as they typically depend on one income earner,
which impacts on their standard of living.
However, there is a risk to these policies that should be
carefully considered. Although they provide much needed support they may unintentionally
change the character of the family by implanting the State as the primary
caregiver and bread winner within the family nucleus thereby competing with the
traditional roles of parents.
An alternative approach
Tax Statistics, a joint publication by South African Revenue
Service (SARS) and National Treasury indicates the growth in the individual tax
register from 1.7 million in 1994 to 6 million in 2010.The register has since
doubled again following a policy change in 2011 to register all individuals in
Since more than 12 million people are now included on the tax
register we should consider using the tax system to provide direct tax credits
to families. This will provide an alternative mechanism of assisting poor
families whilst keeping the traditional nature of the family intact.
The tax code in the United States is much more family-friendly
than its South African counterpart. A typical American family with two
childrenfor tax year 2011 could make $45,399 and still pay nothing in federal
income taxes. This is because of allowable deductions and a $1,000 per child
tax credit. In addition the American system allows for tax credits that are
refundable. That is, you still receive the credit even if you don’t have any
tax liability. These refundable credits include the adoption credit (up to
$13,360 per child), the first-time homebuyer credit (up to $4,000 or $8,000 if
married filing jointly), the additional child tax credit (up to $1,000 per
child), the American Opportunity credit (up to $1,000 per student, with 40
percent of the credit being refundable), and the earned income credit (up to
$5,751 for three children).
Paying tax is not fun and we can but grin and bear it. However
we can influence the way taxes are collected and distributed. Perhaps the
current tax code should become more family-friendly and support the important
role of families.