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British Public Wrongly Believe Rich Face Highest Tax Burden, New Research Shows

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http://www.theguardian.com/money/2014/jun/16/british-public-wrong-rich-poor-tax-research

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.

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%.

The survey of more than 1,000 people also found a strong majority – 96% – believe that the tax system should be more progressive than is currently the case.

Duncan Exley, director of the Equality Trust, said the findings underlined the need for the next government to overhaul the system.

Comments on the figures.

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Here we go direct taxation is evil because etc. etc. etc. Indirect taxation is evil because etc. etc. etc. repeat rinse reuse.

Bottom line there's no "perfect" tax system. Likewise one system that works in one country may not work in another.

That said I think what we have here in the UK can be improved. We can start by adjusting the tax band, increase personal allowance, increase the threshold for 40% and re-introduce the 50% tax rate but at a higher scale. Remove working tax credit, reform child benefit to one time payment at birth capped to 2 children but subsidise childcare for parents who work pro rata to the hours work.

Remove all benefit to new migrants, all non residents have a 3 years qualifying period and remove all NHS service except trauma to non residents.

Easier said than done ... Rant over.

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The scroungers don't pay any tax. They receive handouts. This report is complete rubbish.

Gordon (I saved the world) Brown gave out tax credits which he then took away again in increased tax, morons who write for the Guardian think this is good. A 'progressive tax system' means that big government will waste more of your money.

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You could just as easily present these numbers as "net transfer from state" and the poorest 10% would be off the charts as recipients of state largesse, paid for by the rich. If one is paying "taxes" on benefits, is that really the same thing as paying taxes on income that you worked 60 hours a week for?

These exercises in cherry-picking statistics to prove some political point (there's another thread going where the TUC does the same thing) are pointless. You can always slice and dice the numbers and present them out of context to show whatever you want. Really, it's not hard. The UK tax system has some serious faults that are in dire need of fixing, but these discussions don't achieve that.

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The problem is tax. Demands to feed the state beast are outrageous, at some point someone's gonna pay, that's the bottom line.

The "solution" is not merely to make someone else pay. The solution is to cut the outrageous amount of tax at source. In any case there's just so much of a tax burden that pretty much all of us are gonna pay for it one way or another.

The report is BS in that I somehow suspect it does not talk about net payments to the state, (even JSA is taxable income IIRC), however even aside from net contribution arguments, the very poor paying tax causes perverse incentives which are better off gone. Better just to mooch than have the government nick it all.

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Guess what, maybe they wouldn't need to be in receipt of benefits from the state if they paid a much lower rate of tax on their income.

http://static.guim.co.uk/ni/1402841766674/Tax-distribution.svg

P.S. The whole "this isn't my truth, because I refuse to believe any figures" argument is a bit pointless.

I'm not saying that I refuse to believe any figures, only that figures can be massaged to present different arguments. I don't think that the poorest 10% should be paying such a large proportion of their income in taxes, but a very large part of those taxes are in the form of excise duties on alcohol and cigarettes, and I don't think those taxes should be reduced. At a certain point, people need to be allowed to make their own decisions, and if they want to waste money on booze and cigs, so be it.

BTW, I'm less inclined to believe a chart that uses the label "mean 10%". What does that mean? If the author doesn't know the difference between mean and median, I wonder what other assumptions and/or mistakes are included in their analysis.

Edited by richc

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BTW, I'm less inclined to believe a chart that uses the label "mean 10%". What does that mean? If the author doesn't know the difference between mean and median, I wonder what other assumptions and/or mistakes are included in their analysis.

It probably means the middle 10 percentile as calculated by mean.

I suspect that the difference in tax contributions between the top and bottom ends is at least partly due to the disparity between capital gains and income tax. Personally I think our entire taxation system has entirely the wrong emphasis and we'd be much better off with an LVT and no income taxes at all; but if we are going to keep the current emphasis it would make a lot more sense if capital gains was brought back in line with income tax (as per Nigel Lawson in the late 80s), they are both income after all and that would probably allow an overall reduction in income tax rates.

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I can only agree, at the tax income from employment and investment equally, but far better to overhaul the tax system and move the emphasis away from income arising from work onto other areas.

Pity the only party advocating this in parliament right now are the Greens...

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The problem is tax. Demands to feed the state beast are outrageous, at some point someone's gonna pay, that's the bottom line.

The "solution" is not merely to make someone else pay. The solution is to cut the outrageous amount of tax at source. In any case there's just so much of a tax burden that pretty much all of us are gonna pay for it one way or another.

The report is BS in that I somehow suspect it does not talk about net payments to the state, (even JSA is taxable income IIRC), however even aside from net contribution arguments, the very poor paying tax causes perverse incentives which are better off gone. Better just to mooch than have the government nick it all.

Only problem is, what are you going to cut?

I see an awful lot of people posting rants like this about how high the tax burden is meant to be, but never a plan of what they would actually cut. Usually a bit of a rant about 'diversity consultants' which would not make the slightest difference. It's lazy and ignorant, to be honest.

Much of this 'state beast' is transfer payments, pensions being the biggest part. Then there are health and education. It's a hugely complicated problem.

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Thankfully for me I live in Scotland and the concept of a LVT is being discussed openly. They are also taking steps to ensure the register of land owners is up to date so this will be an option.

Lucky you! Given devo max seems to be the de facto no vote option I have a feeling that whatever happens next year I'm going to end up being very jealous. I can only hope that any LVT in Scotland is done well and therefore paves the way for replication south of the border.

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It probably means the middle 10 percentile as calculated by mean.

Small problem, you can't actually calculate the middle 10th percentile from the mean because the mean isn't necessarily in the middle 10th percentile. You can from the median, but not the mean. They're mixing different types of measurement. Mean is generally used with a measure of deviation, while median can be used with percentiles. Sorry to get all pedantic about it, but what they wrote on the chart is a word salad without any logic. If they weren't claiming some sort of expertise, they could have written "middle tenth" or "average tenth", but they chose to use a more pretentious term and they used it incorrectly. In the end, it's just not clear how the data have been manipulated to come up with their numbers.

Edited by richc

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Only problem is, what are you going to cut?

I see an awful lot of people posting rants like this about how high the tax burden is meant to be, but never a plan of what they would actually cut. Usually a bit of a rant about 'diversity consultants' which would not make the slightest difference. It's lazy and ignorant, to be honest.

Much of this 'state beast' is transfer payments, pensions being the biggest part. Then there are health and education. It's a hugely complicated problem.

Public sector pensions are gonna be one of the first things to face the pain...

But whole departments can go, there are a lot of fripperies and luxuries. Culture Media and Sport? I'd abolish it down to a 10% size regulatory rump. A big chunk of local government services should be similarly abolished, too. I mean seriously, government money for car pooling schemes? Just get rid of it . Run through the list of public services, unless it's absolutely essential, it should go.

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Small problem, you can't actually calculate the middle 10th percentile from the mean because the mean isn't necessarily in the middle 10th percentile. You can from the median, but not the mean. They're mixing different types of measurement. Mean is generally used with a measure of deviation, while median can be used with percentiles. Sorry to get all pedantic about it, but what they wrote on the chart is a word salad without any logic. If they weren't claiming some sort of expertise, they could have written "middle tenth" or "average tenth", but they chose to use a more pretentious term and they used it incorrectly. In the end, it's just not clear how the data have been manipulated to come up with their numbers.

You can calculate the mean for the entire dataset and then work out a 5% spread either side. Not sure why they would want to do it that way though and it's not necessarily what they have done, I'm just trying to translate their unclear framing of the data. Another explanation is that they've taken the mean tax distribution from the median calculation of income bracket. Agreed that they are mixing different types of measurement and may just be confusing themselves, but then the charts in the article may well have been generated by journalists rather then taken directly from the source material.

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It really depends if we're discussing "rich" folk who inherited their wealth and are consequently lucky enough to use that to make more money, or "rich" folk who have applied themselves like no other and work 60+ hours a week.

I think the former should be taxed to take some of the burden off the latter personally.

Edited by byron78

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Public sector pensions are gonna be one of the first things to face the pain...

But whole departments can go, there are a lot of fripperies and luxuries. Culture Media and Sport? I'd abolish it down to a 10% size regulatory rump. A big chunk of local government services should be similarly abolished, too. I mean seriously, government money for car pooling schemes? Just get rid of it . Run through the list of public services, unless it's absolutely essential, it should go.

Totally agree that cuts must be made (as opposed to the ideological spending shifts and increases under the current coalition) but given the level of the national debt we'd probably need to keep the tax take up for a good while afterwards in order to pay that down. Of course we could just default on the private sector pensions that hold a large chunk of the national debt as well as on the public sector ones (the worst of these unfunded schemes are already unavailable to new entrants a reduction in cost would necessarily involve a default). Given they all look like ponzi schemes designed to transfer wealth from the young to the old I'd happily vote for a partial default whereby benefits were capped at contributions.

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I am not sure, where they got their data from. This one is from Wikipedia and it claims the opposite. Plus the original research misses the benefits area such as housing or tax credit benefits ...

512px-UK_tax_NIC_percentages.svg.png

Edited by Damik

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I am not sure, where they got their data from. This one is from Wikipedia and it claims the opposite. Plus the original research misses the benefits area such as housing or tax credit benefits ...

As mentioned above, they're merely demonstrating that the poor pay a lot of booze and fags tax while the very rich mostly pay capital gains, if anything. It's those in the middle who are ******ed.

Just more claptrap to justify raising taxes even higher on the middle class.

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You can calculate the mean for the entire dataset and then work out a 5% spread either side. Not sure why they would want to do it that way though and it's not necessarily what they have done, I'm just trying to translate their unclear framing of the data. Another explanation is that they've taken the mean tax distribution from the median calculation of income bracket. Agreed that they are mixing different types of measurement and may just be confusing themselves, but then the charts in the article may well have been generated by journalists rather then taken directly from the source material.

OK, this is complete overkill on being pedantic, and sorry for that, but you can't calculate the 5% spread on either side of the mean because the mean is a description of the quantities held by the population, whereas the 5% figure is a description of the population itself.

Take an example:

There are 99 people making £1 in salary a year. 1 person makes £901 in salary. The mean salary is £10, but then what is the salary of the 5% on either side of that? It doesn't make any sense, because you have to use the median rather than the mean to say that the median salary is £1 and the salary of the 5% spread on either side of it is £1.

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I am not sure, where they got their data from. This one is from Wikipedia and it claims the opposite. Plus the original research misses the benefits area such as housing or tax credit benefits ...

512px-UK_tax_NIC_percentages.svg.png

That chart only goes up to 200K?

Lots of doctors and hard working professional there and I agree their burden should be lower.

But what about those with enormous inherited wealth (both land and other assets) that haven't done a days work for it?

Is there a chart for folk on 5 million a year or more?

Edited by byron78

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I am not sure, where they got their data from. This one is from Wikipedia and it claims the opposite. Plus the original research misses the benefits area such as housing or tax credit benefits ...

The source is referenced as "ONS Effects of Tax and Benefits on Household Income, 2013" although I can't find this on the ONS website, possibly they are using the 2011/12 dataset, here is the statistical bulletin. http://www.ons.gov.uk/ons/dcp171778_317365.pdf

The chart on page 5 and the supporting data is probably the most useful although it divides the dataset into quartiles rather than deciles, the bottom quartile are paying £4,700 p/a in direct and indirect taxes (my guess is the bulk of this is fuel duty, council tax, booze and fags) but are getting £7,400 back in cash benefits so it's a bit of a moot point whether their tax position is £4,700 out or £2,700 in.

The Equality Trust are taking the position that cash benefits should be ignored, which does then give the result that a high % of income is paid in tax and that this is unfair, which seems reasonable enough but it does ignore the fact that all of the tax is paid back to them. One could equally conclude that the poorest pay no tax whatsoever but that doesn't generate the sort of headlines needed by left leaning political campaigning organisations looking to raise their profile and generate some funding.

Edit: possibly the bottom decile figures are different, there is more data on the ONS website if someone wants to investigate further.

Edited by Goat

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One could equally conclude that the poorest pay no tax whatsoever but that doesn't generate the sort of headlines needed by left leaning political campaigning organisations looking to raise their profile and generate some funding.

There are some that lap it up on here as well. Everything else is propaganda of course! But not this!

Seriously lefties, take a good look at yourselves.

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OK, this is complete overkill on being pedantic, and sorry for that, but you can't calculate the 5% spread on either side of the mean because the mean is a description of the quantities held by the population, whereas the 5% figure is a description of the population itself.

Take an example:

There are 99 people making £1 in salary a year. 1 person makes £901 in salary. The mean salary is £10, but then what is the salary of the 5% on either side of that? It doesn't make any sense, because you have to use the median rather than the mean to say that the median salary is £1 and the salary of the 5% spread on either side of it is £1.

No worries about being pedantic mate :)

I think if they did create a 10% spread around the mean the whole point would be to skew the figures (for instance by including the single £901 salary in your scenario) but that this would also be less marked for a broader dataset. Having said that the more I think about it the more I think I was wrong to even try and figure out what they meant by it as it's more than likely they meant nothing at all and it's just a transcription error by some work experience kid who has been told to re-label the bottom decile group and top decile group as bottom 10% and top 10% in order not to confuse the sheeple and thought he'd better add 10% to the middle mean column too, thus actuallty confusing the sheeple (in this case, me).

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As mentioned above, they're merely demonstrating that the poor pay a lot of booze and fags tax while the very rich mostly pay capital gains, if anything. It's those in the middle who are ******ed.

Just more claptrap to justify raising taxes even higher on the middle class.

Spot on. Middle is vastly squeezed at the moment by this insane housing market too.

Classic Guardian article.

Bring on a flat tax, keep the rich in the country as much as possible, but with greater personal allowance for low earners. They should really tax gains on property instead if they need to make up shortfall as why should one have to borrow to the hilt and invest in property to make money?

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