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”
Matt Booth
The inequality is reduced via public spending, and yes it’s a valid use of public money.
Fergus Mason
But it only becomes “public money” once it’s been taken from the people it actually belongs to. Tax should be set at the minimum required to pay for essential services, and social engineering is not an essential service.
chrissnowdon
They do. Six times actually. £29,000 versus £5,000.
blarg1987
It is a very wide scope.
For example taxation to pay for a universal health care can be claimed by those who want it as an essential service and those who want to get ride of it as social engineering.
Matt Booth
No, it shouldn’t. It should be set at an amount that will cover current and future government public spending.
Social Engineering is a term for “hacking”.
EDIT:
And tax money belongs to the state. It is collected, not taken.