Guess how much tax the rich pay?

pabw

This only becomes irrefutable if there is corresponding evidence that increasing rates of tax in similar generally prosperous conditions has the reverse effect. Do we have this? Otherwise it looks like an excuse for the rich to be paying proportionally less tax than the rest of us, which they undoubtedly are - see private equity capital gains receiving taper relief -effective rate of 10% (though actually less)...

antifrank

It's a secret that was announced on the floor of the House of Commons in July: http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070716/debtext/70716-0015.htm

pabw

This only becomes irrefutable if there is corresponding evidence that increasing rates of tax in similar generally prosperous conditions has the reverse effect. Do we have this? Otherwise it looks like an excuse for the rich to be paying proportionally less tax than the rest of us, which they undoubtedly are - see private equity capital gains receiving taper relief -effective rate of 10% (though actually less)...

dizzy

Fraser, did you watch the same dry and utterly boring debate as me where they kept on repeating a paraphrased quote from that private equity guy that the rich pay less than their cleaners?

Fraser Nelson

Dizzy, yes I did - tho they all blend into one for me. I think those losers have a small point, insofar as cleaners should pay no tax rather than hand it over and apply for it all back via tax credits. Antifrank, I bow to your Hansard-ish memory. All I can say is that figure took me by surprise, and I have had fun goading LibDems with it. They dont seem to know it either. And while im on - you don't know how much of the education budget is absorbed by LEAs do you? That's one stat which has long eluded me...

Brian

Are you sure the wealthiest 1% aren't just massively richer in proportion to everyone else than they were in 1988? I find it hard to believe that many of them are paying anywhere near Lawson's 40% rate.

Fraser Nelson

pabw, what a good point. I know of no country which has appreciably increased tax rates for higher earners - ergo no way to check. But I agree, if my Lawsonian argument is good it should work in the opposite direction.

pabw

What we're essentially talking about here is Laffer's optimum point of taxation in relation to the government maximizing tax revenue. Undoubtedly there is a point at which lowering the tax rate creates a greater yield. However, politically, I think speaking of fairer taxes, rather than simply lower taxes is the way to go. So yes, although the fools in the treasury select committee clearly did not have much of a clue what they're on about, the point remains - the richer pay proportionally less tax. Is that something we're happy with?

pabw

And Fraser, although I tend to agree with you (to a certain extent), would you agree it would be political suicide to advocate cutting the higher rate of tax even if, as you say, this would increase revenue coffers...?

antifrank

Not bang up to date, Fraser, but this must be fairly indicative of the split between what was dfes and the local education authorities: http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070208/text/70208w0014.htm And of course this measures outputs per child rather than budgets, and ignores training and university.

Simon Stephenson

I'm sure you wouldn't wish to mislead people, but aren't you confusing "rich" with "high personal income declarers"? It's only to be expected that those people who declare high taxable incomes pay a significant amount of tax. I think the point that many people make is that many people with collosal incomes manage through fair means or foul to avoid being declarers of high taxable incomes. Do you see how this consideration rather blunts your argument?

Fraser Nelson

pabw, I agree about political difficulty/impossibility about cutting taxes for the rich in order to squeeze more out of then. MPs walked out of Lawson's 1988 budget in protest, and Bush's "tax cuts for the rich" has been hugely unpopular, even though it has led to the rich shouldering a HIGHER burden as the redistributionists should want. Hence that's why I referred to this data as a "secret" - its as if no one knows/believes the effect of the Lawson 88 budget and that it may well prove to be more redistributionist than any of Brown's. When I say no one, I reckoned without the likes of antifrank.

Fraser Nelson

Simon, when I say rich I obviously mean the top 250,000 or so who comprise the top 1% income taxpayers. As for the tax-evading millionaires a) they'll always dodge tax, and can go live abroad b) we benefit from the VAT etc they spend here, so its as well to have them and c) the tax we'd get out of them would not make an appreciable difference to the £500bn we raise every year. So its hard to talk about a measurable public benefit from nabbing them. Just poetic justice.

Simon Stephenson

You write as though the "sheltering" of UK income from UK tax is but a minor problem in the scheme of the whole of UK tax collection. So it may be, but within the area of the taxation of the UK's highest earners, I think you may be assured that it is far from minor. I think what most people in this country would like to be the case is for it not to be possible for people to create income out of the UK economy without this income being subject to UK tax. Apart from the obvious social unfairness of the alternative, this also gives the non-taxpayers huge commercial advantages over their taxpaying competitors - to the further detriment of the UK economy. Apologies for the grotesque mis-spelling of colossal in my earlier post, by the way.

Purple Scorpion

In the real world you can't change one variable and measure its effect. There are always other things changing, and dynamics come into it too - for instance how big was the change, and how unexpected? So in the end, in the real world, you have to make a judgement. That said, what happened after Healey made the pips squeak?

Corin Vestey

I love the way that, when presented with the reality that higher rate taxpayers already pay for the lion’s share of the welfare state ‘enjoyed’ by every one else, and the concomitant reality that cutting taxes increases incentives and reduces evasion thus driving up revenues that can be ploughed back into that welfare system, the immediate response from so many is to sob “But what about fairness?” You can either have a system that is designed to produce the maximum amount of activity and therefore create more tax revenue from that to fund what we have been indoctrinated to believe are essential public services or you can have a system that attempts to live up to some arbitrary definition of fairness and in the process stifles activity and draws less revenue as a result. We have the latter. We need the former. Fairness is not only irrelevant but actively damaging for public services as it results in lower funding. Get over it or join Dame Toynbee in the loony ward.

Rory Sutherland

My suspicion is that it is actually the second-richest 1% of the population who pay 22% of all taxes - while the richest 1% pay no tax at all, being domiciled elsewhere.

B Careful what you wish 4

Over lunch two friends were discussing the government's recent round of tax cuts: - "I'm opposed to those tax cuts," the retired college instructor declared, "because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that's not fair." "But the rich pay more in the first place," the businessman argued, "so it stands to reason that they'd get more money back." He could tell that his friend was unimpressed by this meager argument. Even college instructors are a prisoner of the myth that the "rich" somehow get a free ride in America. Nothing could be further from the truth. Let's put tax cuts in terms everyone can understand. Suppose that every day ten men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve. 0 + 0 + 0 + 0 + 1 + 3 + 7 + 12 + 18 + 59 = 100 cost of dinner "Since you're all such good customers, he said, I'm going to reduce the cost of your daily meal by $20." Now dinner for the 10 only costs $80. The first four are unaffected; they still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal. The restaurant owner proceeded to work out the amounts each should pay under the same assumptions: Now the fifth man also paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, and the ninth paid $12 leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings. "I only got a dollar out the $20," complained the sixth man, pointing to the tenth, "and he got 7!" 0 + 0 + 0 + 0 + 0 + 2 + 5 + 9 + 12 + 52 = 80 reduced cost of dinner "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!" 0 + 0 + 0 + 0 + (-1) + (-1) + (-2) + (-3) + (-6) + (-7)= (-20) savings on dinner "That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor." The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short! And that, boys, girls, and college instructors, is how America's tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more.

Richard H

Anyone who thinks the rich pay more tax than the poor is a nut.

The rich get money back on everything they do or purchase while ordinary people are virtually taxed on their taxes.

The presence of rich people in a Country doesn't make poor people better off either, the idea that somehow the wealth of the super-rich will "trickle down" to
the poor (as if somehow they can have so much money that they'll give it away) is Alice In Wonderland economics, I've never seen any of that money coming my way! It's a fiction. Rich people don't make poor people better off -altruism and money-making don't go together - they make rich people rich.

For example, I don't give a damn about Canary Wharf because it's a Cathedral for the poor to worship the wealthy, I want to see that money go to where it can make a real difference - it's a big shiny building in a big shiny location while the rest of the towns and minor Cities in the UK are left to crumble.

"B Careful What You Wish 4's comment is just the kind of thing that annoys me - it's misdirection - ignore the mathematics and ask yourself how the rich guy at the table ended up with the lion's share of the money in the first and how much money the other guys would have if he had never existed in the first place.

Andy

Those figures looked like they only dealt with income tax. I wonder what the picture is when you include NI (which of course is capped), VAT and all the various duties etc. Concentrating only on Income Tax is a bit of a scam and of course has led to the accusations of 'stealth taxes'.

Thomas B.

It appears that Richard H. is either very ignorant or very naïve.

I’m a professor of economics here at the Claremont Colleges in So. California. And have been for the last 18 years.

To say that poor people pay more taxes than the rich is pure lunacy and has no basis in fact.

I defy Mr. H to show or site one shred of historical or empirical data to back up his claim. He has obviously not done his homework on the subject and has instead chosen to swallow the propaganda of the far left democratic extremists.

Richard,
Take some time to educate yourself - you’ll be better off for it and it will save you from being humiliated in public.

Robin Rimmer

Well, I've looked at that table and, by my rough calculations that I won't go into (though please ask if you'd like me to), you would only need to increase the tax rate to 46.4% for the top 25% of earners to totally eliminate income tax for the poorest 50%.

Yeah, that's a stupid idea - rich people can't possibly afford to lose an extra 4% a year. They might only be able to buy one new porsche this year or, horror of horrors, only take three holidays!

How would the poor guys cope!?!