Cuts to tax credits will make things even worse for the poorest households
New data from the Office for National Statistics (ONS) has confirmed that the richest people in the UK are contributing a lower share of income tax than the poorest.
In its latest statistical bulletin looking into the effects of taxes and benefits on household income (for the financial year ending 2014), the ONS finds that the richest and poorest fifth pay 34.8 per cent and 37.8 per cent of their gross income respectively.
The richest fifth of households paid £29,200 in taxes (direct and indirect) compared with £4,900 for the poorest fifth.
This is despite the fact that, before taxes and benefits, the richest fifth of households had an average income 15 times greater than that of the poorest fifth.
After taxes and benefits are taken into account, the ratio between top and bottom was reduced to four-to-one, leading the ONS to note the importance of benefits and tax credits in rebalancing the top and bottom sections:
“The overall impact of taxes and benefits are that they lead to income being shared more equally between households…
“The distribution of cash benefits between richer and poorer households has the effect of reducing inequality of income.
“After cash benefits were taken into account, the richest fifth had an average income that was roughly six and a half times the poorest fifth (gross incomes of £83,800 per year compared with £12,900, respectively).”
The Tories’ planned cuts to tax credits could make up as much as £5bn of the planned £12bn cut to welfare. As well as helping to reduce inequality, tax credits have been hailed as a driving force in reducing child poverty.
Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter
82 Responses to “Richest are paying lower proportion of income tax than poorest, says ONS”
Fergus Mason
Don’t pretend that tax credits are an essential part of society. They’re a recent innovation and get splashed about with wild abandon. I qualified for them when I was a Sergeant in the Army, earning well over 30k a year. I certainly didn’t need an income top-up to survive and I suspect the same is true for a lot of the people who’re eligible for them.
Fergus Mason
“By the way, libraries aren’t free any more. Tory cut backs.”
Well, not quite. Councils had a choice: Start charging for previously free services, or stop hiring so many useless parasites, cut the salaries of their chief executives and eliminate pointless overseas junkets.
“Why are you content with ignoring the fact that people on benefits cannot simply work harder to become “not poor any more”?”
If they don’t have any marketable skills then, I agree, they probably can’t. That’s the price you pay for not having any marketable skills. In general people get paid what their labour is worth, and sometimes that just isn’t very much.
Matt Booth
Yeah I can agree there. You won’t have needed them at £30k at all. Good on you for not taking them. I also qualified when I started on £23k, but realistically, I didn’t need them, so I never took them.
But a single parent on £12k a year, renting accommodation, needs them. They can’t work to unpoor themselves. They have kids to feed. The new generation. It’s in societies interest that these kids grow up with food in their stomachs and don’t live in poverty. If that means they get electronics for their birthday and Christmas’, on the backs of the tax payer, so fucking be it. Those kids are more likely to grow up, get a good education and become a top tax bracket payer themselves *hint hint*.
Tax credits ARE an essential part of society. But they shouldn’t be. Like I said, either tax credits, or businesses are required to pay a proper wage to people. They already cop off with tax loopholes, so they can afford to pay their staff. In fact, some businesses are signing on to pay people a living wage 😉
Matt Booth
But people aren’t paid what their labour is worth, obviously, because they aren’t paid enough to live, while those who they work for rake it in.
Fergus Mason
“But people aren’t paid what their labour is worth, obviously, because they aren’t paid enough to live”
The two are not mutually exclusive. I’ve hired people whose labour turned out to be worth nothing at all. Sadly I still had to pay the bastards, because I had a contract, but I got shot of them as fast as I possibly could. Really they should have been paying me for the time I had to spend sorting out the crap they turned in.
More seriously, tax credits enable inadequate wages. Abolish them and companies will find that people aren’t willing to work for what they’re offering. Ending the inflow of immigrants willing to work for very low wages would help, too. I’m baffled by people who simultaneously argue that we need immigrants to boost the workforce and that there aren’t jobs for the unemployed. Scarcity pushes up prices, and a wage is a price.