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by mvdwoord
250 days ago
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Not how progressive tax works, but it is the reality, e.g. in The Netherlands. Once you go over certain thresholds, you lose certain benefits leading to a poverty trap in some sense where the incentives of the system do not align with the implied goals of a healthy economy. |
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If you make over £100k, you lose your personal tax-free allowance. That means that your effective tax rate from £100k-£125,140 is 60%
That doesn’t in itself make you worse off than people making less than you, but when one parent makes over £100k, that’s the cut-off for receiving 30 hours of free childcare, as well as additional tax-free childcare up to £2000
So if you have small children with childcare needs, you can suddenly be worse off as soon as you or your partner hit £100k
One way to avoid both of these is to pay the additional money into your pension instead