With just one week to go before the budget, a new report has highlighted that families in the United Kingdom face a crippling tax burden in comparison to other developed nations.
CARE’s 12th Taxation of Families Report uniquely compares the treatment of families in the UK with that of other developed countries and shows one-earner families especially are facing a triple whammy, all of which makes the UK a cold place for families.
The latest figures show that at the OECD average wage, (£39,328 for the UK), the overall UK tax burden is 28 per cent greater than the OECD average both for single parents with two children and on one-earner married couples with two children.
The UK income tax burden also leaves UK families at a strong disadvantage in comparison to families from similar nations. A one-earner married couple with two children in the UK will pay 39 per cent more than the equivalent French family, three times as much as the US familyand more than 10 times as much as the German family. At the OECD average wage, the UK income tax burden is 27 per cent greater than the OECD average for a one-earner married couple with two children.
The greatest concern is that British aspiration is being chocked by absurdly high Effective Marginal Tax Rates (EMTR). CARE’s research shows that at 75 per cent of the OECD average wage, which is a key aspiration point where people will want to push on, families are hit with an EMTR of 73 per cent. This means for every additional pound earned, only 27 pence is kept. For those receiving housing benefit, the EMTR is a staggering 90.6 per cent. They keep less than 10 pence in the pound.
This is not just a high Effective Marginal Tax Rate. It is the highest Effective Marginal Tax Rate to be placed on these families anywhere in the developed world. The OECD average Effective Marginal Tax Rate placed on such families is just 34 per cent.
With the Chancellor making final preparations for the budget, CARE is calling on the Government to conduct a full-scale review of the income tax system, with a focus on how it discriminates against those with family responsibilities.
The charity is also calling for an enhanced marriage tax allowance, as well as a range of other measures.
CARE’s Chief Executive, Nola Leach, said:
“The UK is a cold place for families, with one-earner married couples with children facing a triple whammy, which is crushing aspiration and social mobility.
“The fault does not lie in an individualised tax system, but rather in the fact our tax system is hyper-individualised, with little or no recognition of family responsibilities.
“In a country that values aspiration and with a Government committed to social mobility, this cannot be right.
“For one-earner married couples with two children on the OECD average wage for the UK, the overall tax burden is suffocating.
“The income tax burden is hardly better especially when compared with France, Germany and the United States.
“To further add to the pressure modest income families are facing, the UK’s eye-wateringly high effective marginal tax rates are crushing aspiration.
“If the Prime Minister is serious about levelling up across the country, he cannot ignore the way the tax system discriminates so obviously against those with family responsibilities.
“The Government aspires to be bold and it should therefore take on the task of a full-scale review of how the current income tax system is working.
“It’s time for action and today we are calling on the Chancellor to use his Budget to increase the marriage tax allowance and prioritise reducing the income tax burden on families.”
Notes to editors:
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CARE is a well-established mainstream Christian charity providing resources and helping to bring Christian insight and experience to matters of public policy and practical caring initiatives. CARE is represented in the UK Parliaments and Assemblies.
Read the full report by clicking here.
For more on CARE’s research into the taxation of families, see here: https://care.org.uk/cause/marriage-and-family
Last month, a group of 40+ Tory MPs called for more family-friendly polices: https://care.org.uk/news/2020/02/mps-call-for-more-family-friendly-policies