Right-wingers have been exalting the contribution of the UK’s richest 1 per cent to income tax revenue over recent months. However it’s worth looking at the detail behind these figures.
Brandishing figures published last year by Revenue & Customs, right-wingers have been exalting the contribution of the UK’s richest 1 per cent to income tax revenue over recent months.
It’s a message gleefully proclaimed as a way of breathing new life into the exhausted corpse of the government’s “we’re all in it together” line and adding some more poison to the “hard working people versus unemployed scroungers” headlines.
Their claim has been given some added impetus this week by the widely respected Institute for Fiscal Studies (IFS), which, in a report on the state of the government’s budget that otherwise gave little comfort to the coalition, stated that “the share of income tax paid by the top 1 per cent of taxpayers rose from 11 per cent in 1979 to 27.5 per cent in 2011-12″.
“The income tax alone paid by these 300,000 very high income individuals accounts for 7.5 per cent of all tax revenue. These individuals will of course also pay a large fraction of VAT and capital taxes.”
But before we build a monument to the rich in honour of their generosity, it’s worth looking at the detail behind these figures.
There are a couple of points worth noting about the Revenue & Customs statistics.
Firstly, the shifting composition of the workforce toward low wage work inevitably increases the proportion of income tax coming from high earners, even if each individual taxpayer in the high earning bracket is paying no more tax than previously.
Secondly, among the 287,000 taxpayers liable for the top 50 per cent tax rate, around 12 per cent of the income tax that they pay is not on earnings but on dividend receipts and savings interest.
But these are relatively minor points in comparison to the key fault line running through the right’s proclamations.
The more rounded picture of how the tax burden falls on different income groups is provided by the Office of National Statistics, which offers an exhaustive picture of not only income tax but all forms of tax.
Their data shows that the households with the highest 10 per cent of incomes receive around 28 per cent of total UK income.
Just like Revenue & Customs, the ONS figures indicate that the wealthiest households contribute a substantial share of income tax, putting their contribution at 37 per cent of the total.
However, they also show that the wealthiest make a much lower contribution to total indirect tax receipts, accounting for just 17 per cent of the total.
By the time National Insurance Contributions and council tax are also taken into account, we find that the wealthiest 10 per cent of households contribute 26 per cent of tax revenue despite enjoying 28 per cent of income.
So let’s not lose sleep over the tax paid by the richest people in Britain.
Among the noise that right-wingers have created, what has been lost in the Revenue & Customs figures is the sheer scale of inequality that they uncover, as the share of the top 10 per cent of taxpayers in total income has marched relentlessly upward to take 35 per cent of all wealth generated.
Take a look at wealth owned in the UK rather than just current income and the picture is even starker – 10 per cent of households hold almost 44 per cent of the wealth – assets worth £4.5 trillion.
All this should teach us, once again, a well worn lesson – beware of millionaires bearing statistics. The real story of our economy continues to be one of low pay and unjustifiable inequality. Only if people join the political and industrial fight to reverse these trends will they ever change.
Karen Jennings is UNISON assistant general secretary for Bargaining, Negotiating & Equalities
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