Scaling the ‘Poverty Mountain’: Methods to Extend Incentives to all Workers

Anthony Atkinson and Holly Sutherland

Chapter 2 in Improving Incentives for the Low-Paid, 1990, pp 55-71 from Palgrave Macmillan

Abstract: Abstract A person on £35,000 a year who earns another £50 a year pays 40 per cent of the extra in income tax. There may be a further deduction for contributions to an occupational pension scheme, and possibly an increase in the parental contribution assessed for student grants, but leaving these aside such families keep 60 per cent of their marginal earnings. In contrast, a person earning only a quarter of this amount may face a much higher marginal tax rate. Someone with two children aged 12 and 14, with savings below £3000, is eligible for Family Credit on an income of up to some £9000 a year. This generates a marginal tax rate of at least 70 per cent. (All figures relate to the situation in January 1990.)

Keywords: Poverty Trap; Child Benefit; Basic Income; Housing Benefit; Fiscal Study (search for similar items in EconPapers)
Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-21012-1_2

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DOI: 10.1007/978-1-349-21012-1_2

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