The true marginal cost of taxation in the UK
Thanks for this Duncan. Super interesting. I'd been about to calculate some of this myself when I was sent your piece. One comment, which may affect calculations: Employer NI is actually now at 15%, not 13.8%.
Thanks! Changes the headline numbers a little:
Weighted average MTR: 56.3% complete vs 40.5% restricted (was ~56% and ~40%)
DWL distribution: 72% below £50k, 92% below £80k, 97% below £125k (essentially unchanged)
Wedge costs at ε=0.6 shift slightly:
- HICBC: +£2.9bn (was +£2.5bn)
- PA taper: +£1.2bn (was +£1.1bn)
- AA taper: +£3.5bn (was +£3.7bn)
- Childcare cliff: −£0.6bn (unchanged)
- Mechanical total: £7.4bn (was £7.7bn)
- Total net cost at ε=0.2: £2.6bn (was £2.9bn)
MCPF is still 1.8-2.2
Agree. Any spending with BCR<2 is likely a net negative.
Interesting discussion about ETI. I wonder if this is why people in Asia tend to eat out more.
Is this why their food is better as well?
LOL
Thanks for this Duncan. Super interesting. I'd been about to calculate some of this myself when I was sent your piece. One comment, which may affect calculations: Employer NI is actually now at 15%, not 13.8%.
Thanks! Changes the headline numbers a little:
Weighted average MTR: 56.3% complete vs 40.5% restricted (was ~56% and ~40%)
DWL distribution: 72% below £50k, 92% below £80k, 97% below £125k (essentially unchanged)
Wedge costs at ε=0.6 shift slightly:
- HICBC: +£2.9bn (was +£2.5bn)
- PA taper: +£1.2bn (was +£1.1bn)
- AA taper: +£3.5bn (was +£3.7bn)
- Childcare cliff: −£0.6bn (unchanged)
- Mechanical total: £7.4bn (was £7.7bn)
- Total net cost at ε=0.2: £2.6bn (was £2.9bn)
MCPF is still 1.8-2.2
Agree. Any spending with BCR<2 is likely a net negative.
Interesting discussion about ETI. I wonder if this is why people in Asia tend to eat out more.
Is this why their food is better as well?
LOL