Tax and the Family Comment on Policy in Practice Report

The fundamental problem is that income tax is based on individual incomes, whereas how well-off people are is determined by household size and income, ie. how many mouths there are to feed.  

The result is that families with relatively high tax incomes are taxed as if they are well off whereas in reality they aren’t and have to depend on means tested benefits to get by. This surely can’t be allowed to continue – the overlap between the two systems results in families being trapped. It is almost impossible for them to do anything to increase the amount they have to live on.

Isn’t the answer to start by bringing income tax liabilities more into line with household incomes?

There are things that can be done without abandoning independent taxation. When independent taxation was introduced there were special allowances for married couples and single parents which did do this and Nigel Lawson had always planned to allow couples to pool their allowances. This would not completely solve the problem the report has identified but it would reduce the number of households paying tax and entitled to universal credit. Tax cuts increase incomes for universal credit calculations.