ABSTRACT
A consequence of the new, tax-induced poverty, and more specifically of the rebates that offset it, has been the creation of a huge, American-style underclass of individuals and families whose living standards depend on government handouts than on their own efforts. Excessive taxation of people on low incomes, especially families with children, is the single most important reason for the increase in welfare dependency since the 1960. The changed incidence of taxation, at the expense of the lower paid, can be accounted for in several ways, including removal of the lower rate tax bands and earned-income tax relief, greatly increased National insurance (NI) contributions, and erosion of the income tax base by the non-personal income tax allowances. NI contributions, local authority rates and taxes on income bore the brunt of the increases, and the incidence of tax shifted away from middle and high income groups at the expense of the lower paid.
