Google search "effect of tax on unemployed"

Somebody stumbled across my blog via the above search, not that I can track down where I was on the list.

Two things I can offer up in evidence, if he or she ever comes back ...

1) "Families and work" by Annette Walling, ONS, 2005. To summarise, married/cohabiting mothers whose partner is in work, who by and large are not entitled to benefits, and thus face an average tax/benefit withdrawal rate of 25% up to an average salary of £25,000 have an employment rate of 80%. Married/cohabiting mothers whose partner is unemployed, who are entitled to fairly chunky benefits, but face an average tax/benefit withdrawal rate of 74% up to an average salary have an employment rate of 44%.

2) "Labour supply and marginal tax rates"by A J de Bruin, that boils it down to the simple formula that say "the amount of paid labour would increase by [around 3%] ... if the tax pressure on labour income was reduced by 10% (i.e. a reduction in the marginal tax rate from 40% to 36%)".

Seeing as most basic rate taxpayers face an effective marginal tax/NI rate of 41% (including Employer's NI), that means we could more or less eradicate unemployment by scrapping Employer's NI and getting the marginal rate down to 33% (22% basic rate tax plus 11% Employee's NI).

And if not, it must be worth a f***ing try!