Evidence for the Treasury Select Committee

Our evidence looks at an area of the tax system most in need of reform. Unlike other areas of Government policy, income tax takes no account of household incomes. 

The official figures for income inequality have always taken account of household incomes, that is income net of tax and benefits. Government policy generally is based on these figures. Exceptionally the income tax system does not take this approach.

The problem to which this gives rise is not the tax on low pay, but the tax on families with low household incomes. In order to have a household income net of tax and benefits of the same size as that of a single person without dependents, a family with children will need a much higher gross income. It is of course gross income on which income tax is payable.

The full report can be read here.