How the tax system discourages work

One of the great scandals of this government is how many obstacles there are to people moving up the economic ladder. The Red Book (page 62) reveals that more than 1.8 million people are caught in a 60 percent marginal tax rate—as they earn more they lose access to tax credits and welfare benefits and also have to pay tax on the additional income that they are earning—which is an increase of more than a million since Labour came to power. This hardly encourages people to work their way up.  

Much of the blame for this falls on Gordon Brown’s absurdly complicated tax credits system. Word is that Stephen Byers plans to raise this in the Budget debate this afternoon.