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In the UK we have the tax free allowances, but we start to lose them as we earn more. For instance, around £100k in earnings they start to tax your personal al
by benjaminwootton 4y ago
In the UK we have the tax free allowances, but we start to lose them as we earn more. For instance, around £100k in earnings they start to tax your personal allowance so you are effectively taxed at 60%. You then move into 45% tax and then start to lose pension allowances at £250k.
First world problems, but these are all cliffs where it makes sense to keep your income down. Losing 20% off the top line will reduce your income by closer to 10% if my math is correct.
We have a problem in the UK with higher earners dropping out of the workforce partly because of the tax incentives. I personally choose not to work as an employee in the UK because I would be paying more than 50% in tax.
- rpep 4y agoThe child benefit threshold makes it pretty bad for most mid to high household incomes too, effectively a 60% marginal tax rate between £50k and £60k if you have a student loan
- nasmorn 4y agoThat is horrible. Basically repeating the mistakes the government makes with people on benefits in the tax code. I don't understand how you can design any financial incentive systems with discontinuities such that you actually earn less by working more. That is a totally unforced error. I agree that people on 100k a year maybe don't need some kind of allowance but then just add another bracket at 85k that erodes it away instead of pretending that the people at 99k still really depend on it.