An Introduction to Microsimulation Tax-Benefit Models

You are the finance Secretary: Task II - Let’s Get Unicoria Working!

The Government, worried about sluggish economic growth, changes tack and decides to go for economic liberalisation, encouraging people to work harder and keep more of what they earn.

Your task is to design a package which:

• has close to zero net cost;
• cuts marginal tax rates, especially very high ones;
• if possible, improves replacement rates so as to encourage people back to work; and
• implements an overall income tax cut of £50 million.

In doing all this, you should try to avoid hurting the poor as much as possible, though some losses may be inevitable.

Again, briefly report on your package from different perspectives.