Tax/ benefit reform

• Tax/ benefit reform is a free market economist idea which states that by reducing income tax at the lower end, more people will be incentivised to join the labour force. This can also be done by reducing out-of-work benefits or being made more difficult to claim
• Tax/ benefit reform can lead to the voluntarily unemployed to become part of the labour force, therefore increasing quantity of labour
• Lower tax rate for the higher end will incentivise the most talented workers to stay in the country and improve their performance further
• Free market economists argue that tax reform for the upper end will lead to a trickle-down effect as high income individuals will spend more in the economy, creating a multiplier
• Negatives of tax/ benefit reform include

  • lower tax income which can lead to austerity measures or increased deficit
  • the assumption that there is no geographical and/ or occupational immobility
  • benefit cuts causing those who cannot be employed to suffer
  • benefit cuts making the poor even poorer