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Rationale on Tax Reforms and Benefit System Undertaken since Labour Come to Power in 1997 - Research Paper Example

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The paper "Rationale on Tax Reforms and Benefit System Undertaken since Labour Come to Power in 1997" highlights that not all the people who are unemployed; are not looking for employment. Not all unemployed people are uneducated or personally do not want to look for a job. …
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Rationale on Tax Reforms and Benefit System Undertaken since Labour Come to Power in 1997
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Download file to see previous pages Because of the continuous failure in the general elections of 1979, 1983, 1987 and 1992, the Labour Party observers began describing the labour party as ‘social democratic’ or ‘neo-liberal’ more than a democratic socialist. Blair’s described the new labour party’s political position as a ‘Third Way.’v
Since the May 1997 general election, tax reforms were very active. The restructuring of taxes and benefit systems were implemented for the benefit of the lower-income UK citizens including those who are employed. The Labour government uses the IFS tax and benefit model (TAXBEN) in assessing the impact of reforms that will be directly assigned to individual households.2 (See Table 1 on page 4)
The UK government aims to increase the living standards of the lowest-income households by increasing the benefit levels for those who are unemployed and to introduce the working families’ tax credit in those that are employed. On the other hand, those families who belong to the top decile will be associated with an increase in the national insurance taxes while taking away the mortgage tax relief and married couple’s allowances. (See Graph 1 below; Table 2 on page 6)
The tax rate distribution according to decile is very beneficial to the UK unemployed citizens. This concept of tax rate actually narrows down the gap on the unequal distribution of wealth among the people residing in the UK. It actually releases the tax burden on those who belong to the lower-income earning families.
For example, Cathy is earning £5,000 a month working as a manager in a five-star hotel while Cindy earns only around £500 working on a part-time job as a waitress because she is taking care of her child as a single mother in the morning. Assuming that the government issues a fixed tax rate of 10% per month, Cathy and Cindy will be earning £4,500 [£5,000 - (£5,000 x 10%)] and £450 [£500 - (£500 x 10%)] respectively. In this situation, Cindy will have a serious
Let us take a look given that the tax rate for each individual is bracketed depending on the amount of income each individual or family is earning in a month.  ...Download file to see next pagesRead More
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