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”
chrissnowdon
There is a good point to be made here, but you do yourselves no favours by confusing all taxes with income tax. The rich clearly pay a larger share of income tax because (a) they all have earned income, (b) they are in a higher tax band. What you mean to say is the rich pay a smaller share of their income in taxes overall. This is a fair point but is entirely due to indirect, not direct, taxation.
Fergus Mason
The purpose of taxation is to raise funds for public spending. “Reducing inequality” is not a legitimate purpose for it.
Mike Stallard
I teach immigrants English. We have a lot of Russians, lots of Lithuanians, a few Latvians and a sprinkle of Poles and Bulgarians. Today – triumph! – my third Moldavan!
I very much look forward to collecting our first Estonian. But they don’t want to come here. Do you know why? Their finance minister simplified the tax system down so that everyone – regardless – paid 13% of their income. It was, apparently (and I bet I get corrected here) that simple. Everyone coughed up, rich and poor. The economy burst into life and nobody came to England.
Couldn’t the Labour Party offer the same kind of thing? There is no reason not to really, is there?
Matt Booth
But, if the rich are “earning” 5 times more than the bottom quarter, why aren’t they paying 5 times more tax?
Matt Booth
Flat rate taxes are insanely disproportionate.