It sounds worrying, doesn’t it? Every time we turn on the TV, connect to the internet or read a newspaper we seem to be given dire warnings about the precarious state of our economy and how it will affect various sectors of society.

To this effect, Paul Johnson, director of the IFS (Institute for Fiscal Studies) has claimed that a combination of low interest rates on savings, lower levels of welfare benefits and higher tax rates will mean that families will potentially see their household budgets fall to 2002 levels, a decrease which according to Johnson has not been seen since the 1970s (no, don’t worry, household budgets will not be slashed to 1970 amounts, that really would be dire)!

And whilst the above three factors should of course be taken into consideration when bearing in mind one’s household budget, CARE’s own research has shown that as a proportion of income the tax burden (tax less benefits) faced by middle income families, especially those where one person decides to stay at home and the other decides to work, is higher than in other developed countries within the OECD (Organisation of Economic and Co-operative Development). Indeed, according to figures in CARE’s Taxation of Families 2009/10 research paper, families of this type who earn an average wage typically have a tax burden that is more than 50 per cent greater than the OECD average!

Thus, whilst these sorts of realities continue to exist, the situation for families where one partner works and one does not will continue to be tougher than it needs to be. I should be clear here however in saying it is not my opinion that one earner families should simply pay less tax. No, what I think CARE’s findings show more than anything is that these families should pay a lesser proportion of tax (in such a scenario the overall rate of income tax might increase, but one earner families would pay a lesser proportion of that rate), or that other family types which have lesser familial responsibilities (high-earning single people for example) should pay a greater proportion of the overall tax rate.

Bear in mind also that no recognition of familial responsibilities is made within our income tax system. This latter point will be discussed in more detail in next week’s blog post. Log on here next week to read it!

Read more:

- Daily Mail

– CARE’s Research