Regressive impact of IDS’ marriage (+ kids) tax

According to today’s Telegraph, Iain Duncan Smith today “savages Labour’s record on the family” but his new marriage tax proposal, being considered by the Tory high command, would work only to widen inequalities – benefitting the rich and do nothing for the poorest families.

On Monday, Andrew Sparrow revealed that Iain Duncan Smith “is urging Cameron to limit the transferable tax allowance to married couples with children under the age of three.” This followed up an earlier Paul Waugh exclusive outlining that the plan would “only cost £600 million a year.” Today, IDS says:

“Only by recognising and supporting marriage in the tax system, and abolishing the couple penalty in the benefit system, will we begin to restore the British family to health.”

Last year, Left Foot Forward outlined the regressive distributional impact of the £4.9 billion tax break for all married couples apparently favoured by David Cameron when, according to the Daily Mail:

“He dismissed speculation that the Conservatives might limit their long-standing commitment to support marriage to couples with children, or those on low incomes.”

But an answer to a parliamentary question from Lord Oakeshott of Seagrove Bay reveals that restricting the tax to couples with children would still be deeply regressive. The estimates concern married couples with children under six, but it can be assumed that a similar outcome would be true for couples with children under three.

As the chart above shows, the richest families would be set to gain the most. As this blog has shown previously, the policy also flies in the face of social trends and would disadvantage young people. In 1991, 74 per cent of 30-44 year olds were married but the Office of National Statistics projects that only 43 per cent of the age group will be married by 2021 (Table 3a).

On Monday, Imran Hussain head of policy for Child Poverty Action Group said:

“[The Centre for Social Justice] report rightly identifies that bringing up children is more difficult for single parents than it is for married couples, this is in no small part because single parents are more than twice as likely to be in poverty.

“Single parents and their children need support and understanding, not punishment through the tax system.”