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Taxing times in the UK June 18, 2014

Posted by WorldbyStorm in British Politics, Economy.
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Another useful piece in the Guardian this week undermined the apparently commonplace trope that the wealthiest pay the most proportionately in tax in the UK.

The British public dramatically underestimate what the poorest pay in tax and wrongly believe the richest face the biggest tax burden, according to new research that calls for a more progressive system.
The poorest 10% of households pay eight percentage points more of their income in all taxes than the richest – 43% compared to 35%, according to a report from the Equality Trust.

This trope is an interesting indicator of how the orthodoxy has, in a sense, colonised attitudes and in such a way as to shape public policy (whether directly or indirectly).

The thinktank highlights what it sees as a gulf between perceptions of the tax system and reality. Its poll, conducted with Ipsos Mori found that nearly seven in ten people believe that households in the highest 10% income group pay more of their income in tax than those in the lowest 10%.

Though on reflection this last point isn’t that surprising. Consider how the political narrative across the last three or four years has been quite deliberately positioned to berate those who have least, and this has been manifest in attitudes to benefit, lower pay and so on. Match this to an edifice of labour practices – zero hour contracts, and so forth and it is hardly surprising that pernicious (and incorrect) understandings of the overall context emerge.

It’s also worth noting how this distortion of progressively appears:

The report said the higher percentage paid by the poor at the moment was down to a number of taxes. “While income tax and national insurance are broadly progressive, the bottom 10% of households pay roughly 23% of their gross household income in indirect taxes on consumption and more than four times as much of their income in council tax as the top 10%,” it said.

And, of course, we see much the same emerging in this state. But then the trick of concentrating on income tax as the only tax (something again apparent in this state) has been of enormous utility to the right and centre right.

By the way, what of this?

The recommendations follow calls from the European Commission earlier this month for the UK government to reform the “regressive” council tax system, as taxes are relatively higher on low-value homes than high-value ones.

Would, say, the Labour Party attempt to rebuff these misconceptions? Difficult to be optimistic, and all the while those misconceptions take deeper root, with all the implications that that has for how matters proceed from here.

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1. fergal - June 18, 2014

Intereting too that orthodox economists such as Colm McCarthy and Stephen Kinsella have been discussing wealth taxes and a higher tax band. They focussed really on how much these taxes might bring in and the cost of collection. Funnily enough, and it struck me while reading them that they didn’t mention the old chestnut of the rich already paying too much.Is a tide turning here?

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WorldbyStorm - June 18, 2014

That is interesting fergal. What is the motivation?

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fergal - June 18, 2014

Hard to know World, but the govt. parties getting hit hard at the recent elections led to the return of people’s discretionary medical cards- maybe this has something to do with it. Telling people that the rich are getting soaked and are untouchable may not be such a runner with an angry electorate?? Very tentative explanation here.

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WorldbyStorm - June 18, 2014

That would make a lot of sense fergal. They’re running out of options.

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2. Tomboktu - June 18, 2014

ONS data shows the actual distribution? Joe long will the Tories allow that to continue?

I don’t know if it’s a chicken or egg question, but is it the attitudes or knowledge that needs to change first?

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3. Tomboktu - June 19, 2014

Michael Taft has an interesting article this week on the myths about residing taxes on the wealthier.

http://notesonthefront.typepad.com/politicaleconomy/2014/06/championing-the-affluent.html

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4. 1MayBloc - June 19, 2014

Even Goldman Sachs are getting in on the act…..
“Real Business Leaders Want to Save Capitalism”

http://www.social-europe.eu/2014/06/real-business-leaders/

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