Simon Walker, director-general of the IOD, has called on George Osborne to introduce a flat tax, as it emerged that some middle-income families are paying 73% tax on income since losing child benefit.
The Chancellor scrapped child benefit at the start of this year for households where one inhabitant is earning £60,000 or more.
If you earn between £50,000 and £60,000, you lose a portion of child benefit. Experts have calculated that withdrawing a portion of child benefit for that salary bracket means a single earner with a family of six ends up paying a “marginal tax rate” of 73%.
Walker told Sky News: “This is a huge disincentive as it is for beneficiaries on the lowest wages – some of them can be paying 70%, 75%.
“I would like to see that there is a level above which the tax take should never rise, so you should never pay more than 50p on the pound you bring in. If you are doing that you are doing something that is wrong and that degrades the motivation to work.
“I am all for a flat simple tax system – it has been shown to raise a lot more money.
“The top 1% of taxpayers pay 15% of all the tax in this country. Flat, simple taxes are the way to do it.”
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