WP 2022-02.
Exectutive Summary
Whether the household or the individual should be the appropriate unit for the assessment of taxation is contested in economics. We argue that the household should be the unit of taxation. This would normally be limited to those members of the household who are members of the same family. However, we will tend to use “household” and “family” interchangeably in the remainder of this paper.
The economic arguments for assessing tax on the basis of individual or family income are finely balanced when we consider the tax system alone. However, when we look at the impact of the welfare and tax systems combined, it is clear that the current tax system in the UK – which is wholly focused on taxing individual income – is flawed. The tax and welfare systems discriminate systematically against families with an unequal split of incomes and discriminate against family formation.
