Income Taxation, Income Support Policies and Work Incentives in the UK

Abstract

One of the oldest, yet currently most topical, issues in the economics of public policy is the question of the disincentive effects associated with income taxation (and income support schemes). Recent concern over work disincentive effects has motivated quite drastic reforms to tax (and, in some cases, social security) systems in the USA, UK, Australia, and elsewhere. Even Scandinavian countries with socialist governments and a long tradition of steeply progressive income tax systems and extensive social security provisions, such as Denmark and Sweden, have tax reforms to promote work incentives under consideration.