From the TUC

Our regressive tax system

29 Jul 2009, by in Economics

Today ONS has published the fascinating The effects of taxes and benefits on household income, 2007/08 – summarised here or in its full 38 page glory here.

There’s a lot to get your teeth into here. But basically it’s a pretty depressing story. Benefits and tax credits make a real difference to the distribution of household income but the engines of inequality run even faster – and the net effect is that income distribution got a little bit better but has got worse again.

It’s full of tables. But on the day that the Tax Payers’ Alliance has attacked the 50p tax rate on the rich, here is a table showing how much each income quintile pays in tax:

Taxes as % of income by income quintile

Bottom

2nd

3rd

4th

Top

All households

All direct taxes

10.8

14.1

18.6

21.8

24.9

21.0

All indirect taxes

27.9

18.6

15.9

13.7

10.0

13.9

All taxes

38.7

32.7

34.6

35.4

34.9

35.0

It’s actually the not the top quintile who pay the largest proportion of their income in tax. It’s the bottom quintile.

Depressing.

2 Responses to Our regressive tax system

  1. ???
    Jul 30th 2009, 1:57 pm

    Do you have the same table showing how much of the total tax take each quintile represents?

  2. Nigel Stanley

    Nigel Stanley
    Jul 31st 2009, 10:28 am

    It’s not in this document, but could clearly be calculated from the same data.

    Obviously the rich contribute far more than the poor, and this will be used by the defenders of the status quo to suggest that the tax system is progressive.

    On the other hand if the bottom quintile are not contributing that much, then it would not cost a lot to reduce their tax burden.

    But as most of the tax paid by those with the smallest incomes comes from indirect taxes, that would require some more fundamental rebalancing.

    And of course these figures don’t take account of benefits (though they are in the original document) and some indirect taxes such as tobacco tax have wider purposes than revenue raising.

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