Economics class: Number of people caught in 60% ‘tax trap’ up 45% in two years

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Specification:

• Fiscal policy, taxation

Click to read the article and then answer the questions:

Number of people caught in 60% ‘tax trap’ up 45% in two years

• Describe the personal allowance taper for those earning more than £100,000 a year

• Explain how fiscal drag contributes to more individuals having part of their income taxed at 60%

• Explain the disincentive effects that are associated with high marginal rates of tax

• UK income tax thresholds might be described as ‘lumpy’, with a taper applied to the personal allowance for those earning more than £100,000 a year, and the taper to child benefit for those earning more than £60,000 a year. Evaluate the benefits that would accrue to the UK economy if such anomalies were corrected

Gavin Clarke, Emmanuel College