I've been analysing some HMRC data this afternoon. The data in question is available here and shows the shares of total income (before and after tax) for percentile groups, 1999-00 to 2012-13. I've ignored the data after 2010 as it is estimated and looks hopelessly incorrect. I've also compensated for the fact that HMRC still can't work out what happened in 2008-09 yet by using an average for the year either side, which I think a fair statistical technique.
Having done this it wasn't hard to produce the following graph:
The blue line represents the share of total taxable income in this country that the bottom 25% of taxpayers owe. The kick in the last year or so looks impressive, but is flattered by the fact that the personal allowance rose considerably from £5,225 to £6,475 between 2007-08 and 2009-10 - meaning a fair number of people on low incomes fell out of tax, sending the average upwards.
There's no such explanation needed for the ochre line: that's the share of total taxable income paid to the top 1% of income earners in the UK.
I've put in linear trend lines just in case of doubt about what is going on. Not only do the top 1% have considerably more than the bottom 25% of income earners in the UK, their income share has grown considerably and that of the bottom 25% has fallen.
If you want a graph of inequality that's it.
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Nice, but don’t over-claim for it. The WHOLE story would (a) need to include those who are not taxpayers and (b) look at the after-tax proportions as well – preferably after indirect taxes (VAT etc) as well as income tax…
Agreed
Will do after tax v soon
VAT etc much harder…but since it is regressive wrt income bound t make it worse
will be interesting to see the real numbers for 08-09 onwards when HMRC release them. Their estimates show that the bottom 50% after tax incomes are rising, with the top 1% and top 50% falling
Interesting. But doesn’t one WANT the share of total taxable income for the rich to go up? Ideally, lower income people would pay little or no tax; and rich people would pay lots. And I don’t see why the share paid by lower income people goes up when more of them are taken out of tax as you show from 2006/07, unless you’re taking out of the equation people with incomes who pay no tax (which is a strange thing to do, because it’s a “good” thing when that happens). Or am I missing something?
Er, no
We want everyone to earn enough to pay tax
You’re arguing that we should condone poverty
The work you do is fantastic and I agree with nearly everything you report (including your views on the olympics) but I do have a couple of potentially embarrassing questions, Richard.
1. Which political party was in power during the period shown in the graph?
2. Which political party do you support?
I am not a member of a political party
I campaign on poverty and green issues
I have been severely critical of New Labour – if in doubt, read my book
Next question?
Hi Richard
I read your book as soon as I could, and it is superb. I’ve used he cappuccino analogy so many times that I can almost smell the aroma.
But I noticed that you didn’t answer either of my questions directly, which suggests that they touched a nerve.
All best wishes.
New Labour was in power – I presumed the question was rhetorical and did not need an answer
I have worked extensively with Labour members of Parliament and the Greens. I have also worked with LibDems and the MP I met most recently was indeed a Lib Dem.
I support parties based upon their policy proposals and the candidates they present.
I am not a member of any party.
I’m not sure how you think any of that touches a raw nerve, I admit
But thanks for the comment on the book
interesting that you have worked with labour and lib dems – you published a blog a few weeks ago about the big 4 and their “support” of the various parties (this support being in terms of employee time donated rather than cash donations) and the clear implication that they would enjoy some sort of policy influence. I wonder whether you should also disclose the “value” of your support by party in the spirit of transparency? Just a thought
the fact that the graph shows what it does when Labour were in power is unsurprising – they were just the tories with a different colour scheme in many ways. Would be interesting if someone challenged Ed Balls with this info on something like Question Time though.
If I am asked for advice by a party I give it. That’s part of being apolitical.
And given hat I wish to change the tax system it’s also rather hard to see how I could do it without engaging with political parties.
The Big 4 seconded people to work for parties, free of charge.
That’s very different.
But for the record I suspect (and I have not kept detailed records) I have done 70% with labour, 25% with Greens and 5% with Lib Dems in the last year
As for New Labour – have I not made myself clear on that?
Hi Richard
I know this does not relate to explicit inequality, but in fact relates to latent inequality, which a major component of overall inequality and that is the Tax Gap. This has been aired in Taxation and thought you ought to see the article, the link is below. No doubt you’ll be able to have a suitable riposte published!
All the best.
http://www.taxation.co.uk/taxation/Articles/2012/08/08/44901/mind-gap
It’s for subscribers only – and they haven’t had the decency to send it to me
Any chance of a copy and paste to richard.murphy@taxresearch.org.uk
The article published in Taxation magazine referred to above is by Ed Hagger, deputy director with HMRC, .
A google search produced the following link: http://www.taxation.co.uk/taxation/Articles/2012/08/08/44901/mind-gap, which I hope will work for you, too.
Unfortunately that blocks me out too…