Evidence from the Institute for Fiscal Studies suggests the state would make considerable savings by raising the minimum wage – as every extra pound earned is knocked off the bill for tax credits.
Two thoughts for Polly.
1) While it is indeed true that some people do lose benefits pound for pound as their incomes rise this is a conbination of benefits and taxes, not just tax credits themselves. And even then the number is fairly small….some hundreds of thousands (as opposed to some millions who lose 60 p out of each extra pound).
2) If this were true this would indicate that the working poor faced 100% marginal tax rates. Which would be rather a useful explanation of why it\’s so damn hard to work your way out of poverty in the UK. And it is true for some (those hundreds of thousands) but not for all…..but even so, it\’s an example of the problems with Brown\’s tax credit system, not an example of anything else.