3/3 I also suspect (but stand to be corrected) that many rely on additional sources of income, and that they pay proportionately less tax on these other sources than salaried taxpayers do. Hence the perception that the total burden on middle income taxpayers is disproportionately high in comparison.
I think what you are getting at in a round about way is that taxes on capital are (a bit) lower than taxes on income. This is indisputably true but also…that’s good. Pretty much every economic model including the ones eg the OBR uses will say higher taxes on productive capital (ie not housing) ..
That may be true. I'm not proposing a fix. I made my original comment because I felt that suggesting that 'rising inequality is simply a brainworm' may not stand up when considered in the context of the tax burden on rich person's total income, rather than just the salaried component.
Right but as I have shown we actually have pretty good data dutifully collected by the government on this stuff. Your objection is basically just vibes. People feel that because the world isn’t getting better due to low growth it must be the rich to blame somehow.
...And if I may: I'm not against people being rich. I don't like rich people not paying their proportionate share on the money people earn that is available personally for them to spend, regardless of source. And overall, the rich need to demonstrate that they pay their proportionate share.
But the rich do pay their fair share and then some! This is adequately demonstrated in the tax data where the top 1% pay 22% of income tax and the top ten % pay 62% of all income taxes and 85% of all CGT.
Those big gross numbers are impressive. But again, what percentage do they pay as a proportion of the money they take home each year? (again, not just salaried income).
Those numbers don’t really exist because taxation of assets is lumpy and increases in asset value is not ‘income’. The income taxes stats include all taxable income like dividends and not only salaries.
Yes, but rich people seem to be able to keep more of the money they take home than poor, even if they pay a higher salary tax. If we're talking other taxes, we can look at total effective tax rates. The poorest 10% pay an effective 48% tax rate; the richest? 39%. equalitytrust.org.uk/news/press-r...
For people with very low incomes it’s basically dominated by council tax which is actually regressive. But it’s a v hard group to measure since (1) people in the bottom 10% are not static and that group has huge churn year on year (2) quite a few of the people in that group are homeowners.
Indeed. Rich people may pay more income tax on salaries, but as you say their tax picture is complicated. As it is for poor people. This is why I think it is hard to justify saying that inequality is a 'brainworm' without considering the tax burden as a proportion of (all) income, not just salary.
They pay a much higher proportion of the taxes than they take in income share. The UK tax system really is effectively taxing the rich and really is among the most progressive tax systems in Europe.
No argument from me there. If we are talking about salaried income.
It includes all taxable income subject to income taxes: eg dividends etc. what is not included is increases in wealth caused by asset values increasing (which is subject to CGT).
Subject to tax…….
Hmm... As I understand things, as you get richer, more of your wealth and income comes from investments and capital gains. 24% CGT is less than 45% top rate or the tax on a salary above £50k. You end up paying less tax than on comparable salaried income. Not a tax expert, so happy to be corrected.
A little more than just vibes, I think. There is plentiful evidence that the true marginal tax rates on incomes for the very rich are low, and lower than for salaried income. My point, I think, still stands: your 'brainworm' contention needs to be justified against total income, not just salaries.
But we can see the capital gains and stamp duty returns from wealth people. And they are high! Rich people really do pay a lot of tax and much of the ‘evidence’ you cite is just people misunderstanding the tax system and the important economic differences between taxing assets vs income.
I'm sure they do pay a lot. But do they pay a lot in proportion to their income? And you can argue assets vs income: it is about the amount of money people take home to spend at the end of the month / year. If I take home more, I should pay (at least) the same proportion of tax as others.
The top 10% get about 25% of gross income and pay 62% of income taxes. So they pay about twice as large a share of their income as the other 90% on average.
This gross income. Do you mean gross salaried income? Or all monies flowing into a rich person's bank account?
Gross income means pre tax income.
Including income from non-salaried sources?
My wealthiest friend is a billionaire. I suspect his income is less than mine
Doesn’t include wealth. Not having a mortgage to pay helps in the post tax calculations
.. reduce investment and productivity. I think a case could easily be made that high taxes on capital is part of the reason why the uk suffers from sluggish productivity growth. Not going to make that case today but I will ask: if lower capital taxes led to us style productivity, about 1/3 higher..
.. would the increased inequality be a fair trade for a ~1/3 rise in the median wage? (Not saying that is the trade off numerically but it will be in that vein as a trade off).