ABSTRACT
It is not enough just to look at income redistribution, incentives are equally important. For in broad terms a system that encourages people to work and to pay their taxes is more economically efficient, and more able to prevent poverty, than one which encourages idleness and tax avoidance. From the point of view of incentives, Average tax rates (ATR) are at least as important as Marginal tax rates (MTR), because it is the ATR that determines take-home pay. Patrick Minford's 100 percent MTR applies to families on his subsistence income and to very low paid families with children. The Britain’s Social Democrats have estimated that 20 percent of families with two children would face MTRs of 82 percent. Work incentives for young unemployed people living in the parental home would improve greatly, and for single householders they would also be better.
