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March 21, 2007

Agreeing With Richard Murphy

Never thought I would really say this but in this instance I do agree with Richard Murphy.

The data is here - published in Parliament. The lowest decile pay 42.6% of their income in tax.

Of course I think we might disagree about what to do about it.

But surely this is one thing that right and left, egalitarians and all, can unite against? We clearly have an entirely absurd taxation system, where the poorest 10% of the population are still paying two fifths of their income into the government coffers? Surely, any rational system would start with the presumption that the poor should not be paying in at all?

(Please note, that's gross household income they're talking about, that includes tax credits and benefits.)

March 21, 2007 in Taxes | Permalink

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Comments

If you lower the tax on the poor you will only encourage more people to be poor. Gordon is not stupid!

Posted by: Kit | Mar 21, 2007 3:44:28 PM

[Surely, any rational system would start with the presumption that the poor should not be paying in at all? ]

this would involve zero VAT or other consumption taxes, which are of course what drive this table.

Tim adds: Sure, but 40% of income?

Posted by: dsquared | Mar 21, 2007 3:52:38 PM

"Of course I think we might disagree about what to do about it."

Make cigarettes totally illegal? Including in prisons? Conspiracy theorists think of heroin as a drug of control, but compared with tobacco in prisons it's an inciter to revolution.

Posted by: dave heasman | Mar 21, 2007 3:58:47 PM

You have to be a little bit careful with data at the extremes. This is not to do with income tax as the % paid by people in this income bracked (under £8300 a year) will be tiny. Instead it is mainly because consumption is a higher proportion of income than for other groups. If consumption is 120% of income, which is quite plausible for many in this group, then VAT and duty on that will be a higher proportion of income than if consumption is 75% of income. Food, being VAT-less, mitigates this to some degree.

Posted by: Matthew | Mar 21, 2007 4:01:44 PM

You also need to look at benefits. If taxes are 40% for the bottom decile, then they are getting £60 in every £100 of gross income. But that £60 is more than treble (this is for the bottom quintile, it might be even more pronounced for the bottom decile) original income, which is something like £20. Thus in fact taxes are, at £40, are 200% of original income. But you'd still prefer the tax and benefit system to not having one.

Figures from p.11 and p.8 of here (you'll need to copy and paste together)

http://www.statistics.gov.uk/
articles/nojournal/taxesbenefits200304/
taxesbenefits200304.pdf

Posted by: Matthew | Mar 21, 2007 4:27:23 PM

The problem with exempting the poor totally from tax is that then they have an incentive to vote for tax 'n' spend governments that will tax the better off. There needs to be a degree of them feeling the tax burden so they understand the consequences of relentless tax 'n' spend.

Posted by: Josh | Mar 22, 2007 8:30:17 AM