IFS savages child benefit cap

This year is likely to be one of the hardest for the coalition, as spending cuts begin to hit harder than ever before. Tory MPs are warning that the measure that is most worrying their constituents is the removal of child benefit from higher earners, and analysis today from the Institute of Fiscal Studies gives us some inclination as to why.

The IFS has examined how much this will cost parents earning over �50,000 – the point at which the payments begin to be taken away. It has found that the measure will mean that for someone with one child who earns over �50,000, they will have a marginal tax rate of 52.6 per cent. In other words, for every extra pound earned over that level, 52.6p will be taken away. As they continue to go up the income scale, they will lose more and more cash until they hit �60,000 and all the child benefit payments are gone. This results in a marginal tax graph that looks like this:

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Source: http://blogs.ft.com/westminster/2013/01/ifs-savages-child-benefit-cap/

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