Posted on 10/04/2006 10:38:01 PM PDT by bruinbirdman
Gordon Brown's complex tax system means that millions of people find it more attractive to stay at home rather than go to work, a new report said yesterday.
The conclusion is a serious blow for the Chancellor, who has frequently claimed that his tax credits scheme is reducing poverty and encouraging people back to work.
It will also heap more pressure on the Conservative Party to overhaul the present tax edifice — regarded as the most convoluted in British history.
The Institute for Fiscal Studies report showed that Mr Brown's tax credits system — intended to encourage more people to work — had precisely the opposite effect.
It said that some 2.2 million people were discouraged from putting in extra hours, because they faced having to pay half of all their extra income to the Government.
Stuart Adam, the report's chief author, said: "Across the whole population, Labour's reforms to date have acted to weaken both incentives to be in work at all and incentives for those in work to increase their earnings.
"The biggest single cause is the new tax credits. They have given a lot more money to low-income families but if they go on to become higher-income families it is taken away from them. Increasing means-tested child tax credit is effective at reducing poverty directly, but its indirect effect might be to increase poverty through weakening incentives for parents to work."
The findings will shock many in the Labour Party, whose frequent motto has been to "make work pay".
The blame will be laid squarely at the feet of Mr Brown, for whom the introduction of tax credits has been a personal crusade.
George Osborne, the shadow chancellor, said: "For all Gordon Brown's admirable ambition to tackle poverty, here is the most damaging evidence yet from one of our most respected think-tanks, which shows that his policies are in fact making poverty more entrenched.
"We need a new direction that fixes the broken rungs at the bottom of the ladder of aspiration."
The report, funded by the Joseph Rowntree Foundation, illustrates how those wanting to work overtime, or simply to start a full-time job, face prohibitive extra taxes.
It explained how in 1997 a basic-rate taxpayer with a young child would have been paying the Government 33p of every extra pound they earned. Now, they would pay 70p because working extra hours reduces Child Tax Credit for those with young children.
Some people face so-called marginal tax rates of more than 95 per cent.
And in a further sign of how the tax burden has increased under Labour, the report added: "Since 2003, more than one in four workers have faced an effective marginal tax rate of around 40 per cent or more, the first time this has happened since 1985."
Vince Cable, the Liberal Democrat Treasury spokesman said: "This is yet another sign of why we need a simpler tax system. All of this tinkering with tax credits has resulted in enormous disincentives for getting families to work."
Dawn Primarolo, the Paymaster General, said: "For the Tories to say that poverty has become more entrenched under this Government is nonsense, and forgets their record in office.
"Prior to 1997 the UK suffered one of the highest levels of child poverty of all industrialised nations and the situation was only getting worse.
"Since 1997, this Government has halted and reversed this trend lifting 700,000 children out of poverty."
The Treasury said the number of people facing marginal tax rates of up to 100 per cent had been reduced and pointed to the increase in employment and its introduction of the minimum wage as means of reducing poverty.
It said the IFS report confirmed that work incentives had improved for many people — especially lone parents.
It's estimated that to implement and administer Brown's schemes an extra 800,000 - 1,000,000 civil servants have been hired, who do you think they will vote for in the future ?
Just the Labour "What's yours is mine, what's mine's me own" mentality in a stealth way.
Some things do not change.
That's almost like staying home and getting paid not to work.
yitbos
I'm also sure I'm not the only one to arrive at this conclusion.
We have plenty of work to do.
yitbos
;^)
Wow. That's scary. I wonder what it would be like to try to start a new business or buy land there.
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