Before taxes and benefits, the richest fifth of households had an average income of £81,500 in 2010/11, 16 times greater than the poorest fifth, who had an average income of £5,100.
Overall, taxes and benefits lead to income being shared more equally between households. After all taxes and benefits are taken into account, the ratio between the average incomes of the top and the bottom fifth households (£61,400 and £15,200 respectively) is reduced to four-to-one.
And you wonder why I arge for progressive taxation?
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That in of itself makes the argument for progressive taxation, and moreover the case for strengthening it given the UK’s tax system is not that progressive anymore. It would be interesting to see what the figures looked like back before the shift to indirect (regressive) taxation.
That being said, I do not believe transfers can be the only or even primary means of giving people a decent life. Trying to fix a problem after the fact is never as effective as preventing it in the first place. Decent pay, profit sharing and checks to stop those at the top taking an inordinate amount of the returns on economic activity must be the primary policy tool for making life livable.
A highly progressive tax system and generous social welfare are necessary alongside this of course.
Agreed!
Individuals with high incomes have a high propensity to save, Saving removes money from circulation and hence makes the country poorer. So rich people, at least in this regard, do not create wealth – by saving they subtract from the commonwealth.
It is right and proper that high incomes are taxed highly and redistributed to lower income people whose propensity to consume is high. Spending money, as distinct from saving, which people on lower incomes have a high propensity to do, keeps money in circulation and enriches the country.
It may even make sense to raise the marginal rate of income tax to 60% on the top 1% of earners.
You are, of course, right
Tax credits should not be necessary. The minimum wage and the state pension should be raised to the level of a living wage. Labour did a great deal to level up low incomes through paying benefits, which the ConDems are rapidly tearing down. But they did not tackle the root cause – I guess because they did and still do not understand ‘the system’. It’s only labour/workers who produce wealth and are entitled to a reward who then spend and create the demand to produce. There is a natural balance here which would leave no room for involuntary unemployment
The tax system should then provide decent incomes to those who cannot work.
Interesting figures…
Also it is now been claimed that only 10 million people in the UK make a positive tax contribution — or in other words only 10 million are not taking out more than they contribute.
Presumably this figure is extrapolated by taking into account remuneration, number of dependents and consumption of health and education benefits etc.
Another argument for progressive taxation?
I am working on publishing data on this
Increased transparency on the government’s annual tax spend could be provided by publishing a public “accountability guide” to detail the total cost of a child’s state education, the average cost per person of providing a free health service, etc.
This “guide” would not be intended to victimise large families, but rather disclose the need for the government to operate and control a properly functioning and impartial taxation system – and help demonstrate that nothing is “free” and that for a country to continue to prosper and provide for the lasting welfare of its citizens it is beholden on a partnership between government and its people to observe the disciplines of profit-and-loss accounting.
In response to point made by no. 3 above, this may be of interest to you & Mr Murphy –
http://arthurkli.wordpress.com/2012/07/14/i-pay-my-taxes-but-others-should-pay-more/
Thanks
Did you do the calcs?
Would like to see – all credit would remain yours
Is there anything to show how much landlords gain (game) from the tax coffers? I guess that housing benefit is counted as a benefit to ‘scroungers’.