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
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82 Responses to “Richest are paying lower proportion of income tax than poorest, says ONS”
Matt Booth
You can’t just abolish tax credits and let the ecosystem sort itself out. Simple as that. People will die.
If you hired some idiots then you didn’t do a good job at screening them.
It’s right, though, tax credits enable inadequate wages, and that’s something the government should sort out, by forcing businesses to pay higher wages (I.E, via the minimum wage, which should be about £7.60, and rise slightly more than inflation.)
But we still keep Tax Credits, just don’t adjust for the increase in minimum wage. This should push a lot of people out of needing them, whilst retaining the security for those that still would.
Fergus Mason
“If you hired some idiots then you didn’t do a good job at screening them.”
No, I didn’t. They were freelancers (as am I) and they were misrepresenting themselves with portfolio pieces that, it’s now apparent, they hadn’t written themselves. I don’t subcontract very often and when I do I now stick with a small pool of people I know and trust. They don’t actually need the money, whereas the idiots I hired before probably did, but that’s not relevant.
A national minimum wage makes no sense; it should be set regionally to reflect accommodation costs based on realistic expectations (nobody on minimum wage should expect to live in Kensington, no matter how much they want to). You also need to be wary of setting it too high, or it will rise above what some people’s labour is worth and they’ll end up unemployed.
I would also cap household benefits at 90% of the minimum wage, so there’s always an incentive to be in work. The current situation, where it’s capped at more than a nurse earns, is absurd.
Mike Stallard
A-a-a-a-a-a-men.
So that’s an answer?
Matt Booth
To avoiding a flat tax system? Yeah. The richer people of society wouldn’t pay anything near their fair share if it was a flat rate of 13%.
The richer people in society stood to lose out more in the financial crash than anyone else.
AdamHLargent
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