An exploration of how a ‘flat tax’ system might affect poorer families.
Proposals to create a ‘flat tax’ system, which taxes everyone at the same rate, are sometimes seen as benefiting the better-off. But in Britain, it is poorer families who face the highest withdrawal rates as income rises.
In this ideas paper (and accompanying summary), JRF Special Adviser Donald Hirsch looks at how flattening these rates could help the less well-off to progress. The paper draws on modelling work by researchers from the Institute for Fiscal Studies.
The paper concludes that a flat tax system would be politically difficult if not impossible to implement, but flattening the rates at which taxes, National Insurance and the withdrawal of benefits and tax credits and are imposed on different individuals could contribute to reform.