As often alluded to, are the UK’s rich paying less tax nowadays?

[TheaSaurass]

Generally speaking one of the quickest ways to reduce inequality, is a severe recession when the wealthiest in society with larger homes, and other assets such as collectables and stocks (in or out of a pension), fall more in value, and so significantly reducing their net worth.

But as we’ve found out, few of us are immune from the wider effects of a recession, so a perpetual recession might be some great 'leveller', but it would be most unwelcome by most of us.

How about those tricksy top 1% of the UK population, where if we could somehow tie them down, never mind ‘put them up against the wall’, we are led to think that confiscation will again settle all the wrongs in society and perpetually pay for everything the poorest in society need?

Well in the meantime, this nearly 300,000 citizens currently pay over 27% of all UK income tax raised – and in theory via VAT and other asset purchase e.g. 10% Property Tax on homes just below £1 million to £1.5 million - so they nowadays pay a lot of additional tax, on top of Income and National Insurance.

If more than one property is ‘wealth’, those buying properties to let, nowadays also pay an additional Property Tax surcharge – that may not just discourage new BTL investment, but get many who need capital growth should ever rents be fixed below future funding costs to sell up – but whether the UK is ready to lose a large amount of private sector rental housing supply at this moment, is another debate.

Companies that have been able to both move around, and hide taxable income from September this year, will find this dodgy practice a problem as the OECD measures to create ‘information exchanges’ a few years back to increase international transparency, go live, which is probably why many large corporations are moving/settling in low tax countries, as some big American corporations are doing here.

So there is pretty good evidence up to last year, that the rich are actually paying MORE tax,(with more to come via transparency) and at the other end of the scale, its more easily evident that the poorest workers are paying LESS tax._

“Nearly half of Britons pay no income tax as burden on rich increases”

“Almost half of Britons pay no income tax while the richest are now shouldering the biggest burden on record, a new analysis has found.”

“The Institute for Fiscal Studies said that the proportion of working-age adults who do not pay income tax has risen from 34.3 per cent to 43.8 per cent, equivalent to 30million people.”

So arguably while the rich might shoulder more taxes, isn’t there the age old problem of ‘diminishing returns’ as they are pushed into taking (legal) tax avoidance measures?

Try this link
“Nearly half of Britons pay no income tax as burden on rich increases”

There is a story that illustrates how our taxes work

It concerns 10 drinkers in a bar who decide to settle their £100 weekly beer bill roughly the same way we pay our taxes. So, the first four men (the poorest) paid nothing; the fifth paid £1; the sixth £3; the seventh £7; the eighth £12; the ninth £18; and the 10th man, the richest, paid £59.

Then the barman decided to give them a £20 discount for being good customers. The group wanted to continue to pay the new £80 bill the same way as before. While the first four men still drank for free, the other six divided up the £20 windfall by following the progressive principle of the tax system. So the fifth man, like the first four, now paid nothing, making a 100 per cent saving; the sixth man paid £2 instead of £3 (a 33 per cent saving); the seventh man paid £5 instead of £7 (a 28 per cent saving); the eighth £9 instead of £12 (a 25 per cent saving); and the ninth £14 instead of £18 (a 22 per cent saving). The 10th man paid £49 instead of £59 (a 16 per cent saving).

The men then began to compare their savings. “I only got £1 out of the £20,” declared the sixth man. He pointed to the 10th man, “but he got £10 – the wealthy get all the breaks!” “Wait a minute,” said the first four men, “we didn’t get anything at all. This new system exploits the poor.” So the other nine men surrounded the 10th and beat him up. The next week he didn’t show for drinks, so the nine sat down and had their beers without him. But when they came to pay, they discovered they didn’t have enough money between them to pay even half the bill.

That 1% own about 21% of the wealth, though which does put the tax they pay into perspective. As for your comments about VAT etc - you are aware that poor people pay that too, right?
If you do count ALL taxes, then those on low wages can often spend a high proportion of their income on tax compared to higher earners.

Even those who pay no income tax pay other forms of taxes, and contribute to the economy in other ways:
Unpaid carers save the state a lot of money.
Many middle class and wealthy tax payers are able to work the hours they do thanks to cleaners, nursery workers and care workers.
Teachers and teaching assistants help ensure the next generation of tax payers has the skills needed to earn money for the country...
I could give more examples.

cd: Your analogy only works if those 10 men are all dependant on each other in other ways. eg, if the rich guy sold his products to 7th, 8th and 9th, if the 5th and 6th worked for him and if the first 4 men worked in the bar/brewed the beer, and depended on tips to do this. £100 for a weeks worth of drinking for 10 men is pretty bargainous, so I expect someone is being exploited somewhere.

And btw, you would expect a widening wealth gap to increase the % of UK income tax paid by the 1%.
Put really simply: The number of people in the 1% would stay the same, but as income becomes increasingly polarised the amount earned by each would increase compared to other 99%. So, all else being equal, they would have more income to tax.
That's an oversimplification, but the general principle applies.

If the amount of tax paid by the 1% rises to 27%, or 30%, or 35% (without changes to the tax rules) this would be a sign that things were becoming more unequal, not less.

Plus, a lot of people are left out of your figures. It is quite hard to disentangle what the 1% highest earners actually earn: I can't work out from that link who those 1% are. Are they just the people who pay income tax via PAYE? Because that will exclude a lot of seriously wealthy people.

The analogy works because top earners are those with mobile skills who if pushed can and will go and work elsewhere.

To a software developer for example it is fairly irrelevant whether his desk is in the UK, Spain or Sydney as long as they have an internet connection.

As evidenced in France who under socialist President Hollande, in late 2012 fulfilled his election promise to put a supertax on THEIR 1% earning over 1 million a year, but then in 2014 cancelled this rather blunt policy trying to penalise the rich, and placed (or ‘trickled it down’?) more tax on businesses instead – no doubt compounding the problems they already faced.

The tax take from such penal levels the UK saw in the 1970’s, was only Euro 260 million in 2013, Euro 160 million in 2014 – as France’s annual government budget deficit soared to Euro 84.7 billion – showing once again, a government cannot tax an economy to growth. IMO

“France forced to drop 75%
supertax after meagre returns”

The top 1% already pay a smaller share of their income in income tax than everyone else (about 11.8%.)
The people who pay the largest share of their income in income tax are middle earners.

It is hard to raise tax from the very wealthy, because they are more able to move, and because often they have access to means of reducing their tax liabilities.
It is difficult to raise tax from the poorest, because they have little money to tax in the first place.
The group that pays the most tax are those in the middle.
63% of tax income comes from earners in the 50th to 99th percentile.

That is why we should be really concerned about the future implications of a rapidly increasing wealth gap. Hollowing out the middle and rising inequality will make it much harder to raise tax in the future. Allow wealth to become concentrated amongst too small a group of people, and the total tax collected will decrease (even if the tax paid by that small proportion makes up a larger % of total tax collected).

I know you are worried about losing some of the 27% tax paid by the 1%, Thea and cd.
I am at least as worried (if not more) about losing some of that 63%.

I thought the reason tax takes from raising top rate tax were low was because most top rate tax payers can pay shit hot accountants to help minimise their tax bills.

QuentinSummers

There is Tax Evasion and Tax Planning, the first is illegal and as I mention in my OP, the hiding of wealth becomes far harder from September this year, and Planning e.g. putting more into a pension, plan, is not.

But you are clearly not getting the OP point; the wealthy are paying MORE tax nowadays, and the poorest workers are paying less – with 30 million of working age citizens (43.8%), paying no tax at all.

So it seems to me that the politics of endlessly trying to continually divide up the wealth pie, albeit from all businesses and citizens (especially if anyone is deemed ‘rich’ on £70-£80k a year) – as governments that try that usually just increase in size, and so just sucks up what’s collected, rather than going into front line service – and so it becomes a race to the prosperity bottom, UNLESS employed by the government, and even then up UNTIL the national money/credit card, runs out.

Surely if governments concentrate of business friendly policies to GROW investment, jobs, and therefore the wealth pie, as the UK has tried to do since the financial/economic crash (rather than continually dividing a shrinking source up) – there is more opportunities to ‘fairly’ increase taxes of the wealthy across areas like buying a home, where they can’t ‘evade’ – so more tax receipts come in, across a broader taxed source, as I believe the UK is currently finding.

It has been proven time and time again that if the top 5% or so are already paying a larger amount of tax than before, it really don’t take much negative business/wealth sentiment from a government to ‘kill the golden goose’, especially if they see it as the ideological START of more to come – as France found out, as wealth just left the country, to places like Luxembourg.

Squishy

And addressing your concerns on 'the middle earners', if a government looks to build an economy/spending on taxing the 'rich' and srews that 'goose', then where does the tax flood 'trickle down' go?

Well it won't end with the 'middle earners' (for tax take or political reasons), it will have to be 'shared' by the low earners - and many of those 30 million currently paying NO tax - will be brought into taxation again, one way or another.

Yes. I'm so sick of getting taxed on fucking EVERYTHING and then being told I'm "rich" and should pay even more tax. Give me a fucking break!

The top 5% of earners - those earning £80,000+ pay 80% of the income tax receipts. That should sound alarm bells for everyone in the UK.

@cdtaylornats perfectly illustrates the story behind my username.

I should also add that total income tax receipt doesn't even cover our social welfare bill. I mean........

How much more evidence do you need that more is being taken out by poorer families relying on tax credits, income tax support, housing benefit, child benefit, the ludicrously high pension bills which rises year on year thanks to the triple lock. What am I missing?

There should absolutely be a safety net for the poorest and less abled in our society but the UK benefits system is something else!

Thea
You seem pretty worried here about wealthy tax payers upping sticks and leaving the country, but I seem to recall that on another thread you were pretty blase about a similar issue - you dismissed concerns about a loss of jobs in the financial sector as being just "25%" of jobs.

I agree that a migration of high earners from the country would be a bad thing. But you seem to think that how Bad A Thing it is depends on their reasons for moving:
Leave to reduce tax burden = terrible, terrible news for the economy.
Leave as direct/indirect result of Brexit = Fine, we can manage without them.

And the "middle earners" I was referring to earlier are a pretty wide range - everyone from the "not quite struggling but having to budget very carefully" through to "comfortably wealthy but not fantastically so"
If we allow more of those "not quite struggling yet" tax payers to fall into the "poor" bracket, while the wealth becomes more concentrated in the 1% (also a diverse group, btw) then guess what? We wont be able to get as much tax from those workers. And the statistics will show that the highest earners are paying an increased share of the tax burden, because the money they have to tax has increased.

I assume that you are in favour of slashing public funding? Because that widens inequality, and exacerbates the problems we have. We need healthy, well educated workers with stability in their lives (like a roof over their heads) to grow our economy.

Most of those benefits you highlighted are working benefits, barstool. (I agree on the triple lock though).

We need someone to do the jobs that those people are doing. If those jobs do not pay enough for someone to survive on the wages alone, we need to either top up their wages somehow, or pay more for the jobs they do.

An example: When I was a higher rate taxpayer, I sent my dd to nursery. It was very expensive, but not nearly as expensive as it could have been. Many (not all) of the employees there would have had their wages topped up slightly from the state. Especially the older, most qualified staff with families of their own to support. But, in effect, that money was subsidising my childcare, which in turn allowed me to go out and earn tax for the government.

Working benefits allow workers to survive on low wages. Without them, many would not be able to afford to work. There is a lot wrong with this system, of course, but what should we do?

Would you support a sudden, massive increase in the minimum wage if this reduced the benefits bill?
I suspect not.

barstooleconomics

I agree with your sentiment on those 'rich' in a home earning £80k, as when those taxes dry up, it will be a two worker household, equally as 'rich' on 2 x £40k.

On pensions, the bill is indeed huge, but the main reason that 'Triple Lock' came in, was for the previous 13-years the last government both gave derisory annual increases (as the likes of Council Tax of a 'D' rated property in England went up an average of 105%) - and took out from 1997 a huge amount of cash from Company and Private pensions - and while arguably the latter can look after themselves, the vast majority of those relying on the State.

From 2010 the whole process of reducing a huge budget deficit, getting the economy back on its feet, and addressing previous imbalances is ongoing, and when in the last election that Triple Lock (having done its immediate job) was to be modified to a 'Double' - it was disingenuously attacked, politically.

As was the wealthiest paying more for their care with an asset CAP that didn't currently exist.

And now we are where we are, but in taxation I think we are currently in the 'sweet spot' where not much more can be done on the upside.

In the 2000s the likes of Capital Gains Tax (a real 'wealth tax') was lowered to a time held tapered low of 10%, and if memory serves was revised in 2007, but STILL ended up in 2010 around a flat rate of 18% - as those on the lowest wages who from 2008 began seeing a fall in real (inflation adjusted) earnings, had no government help at all.

I reiterate, with a budget deficit or without one, Budget Day should be about re-balancing 'stuff', and glaring imbalances should be addressed, bit by bit, not created..

with 30 million of working age citizens (43.8%), paying no tax at all.
Noone pays no tax at all. We all pay VAT for example.
Many of those working age citizens will be carers, who are not reliant on the state or earning income to pay tax on (stay at home parents for example). And we are seeing now what happens when that unpaid home work moves into needing paid for - it costs a packet and the govt can't afford it. (Social care and subsidised childcare).
Personally I'd be happy to pay more tax for a fairer society. But I think we should close tax avoidance loopholes first.
The tone of this thread setting people against each other is really unpleasant

Exactly, Quentin.
For the record, I have no problem with people who make money. I love money.
There is nothing inherently immoral in being rich, BUT there is nothing inherently immoral in being poor, either.
It is so wrong to assume that because someone is poor they are lazy or feckless, and it is also wrong to assume that they contribute nothing to society and the economy. I hate it when people do this.

Those who are angry about the working benefits that some recieve - do you support a huge increase in the minimum wage?

I absolutely support an increase in the minimum wage. Companies should be paying their employees a decent salary, not relying on the state to prop up their employees salaries.

What I've noticed in the UK though is so many people willing to do the work for a lot less and we end up with a race to the bottom.

Sqishsy

You say "You seem pretty worried here about wealthy tax payers upping sticks and leaving the country, but I seem to recall that on another thread you were pretty blase about a similar issue - you dismissed concerns about a loss of jobs in the financial sector as being just "25%" of jobs."

First of all, I'm more concerned with subject of THIS OP and those politicking that the rich are paying LESS tax, so wanted to see someone justifying it - and so far I'm still waiting.

Next, surprise, surprise, you take my City view out of context, as I was 'around 25% of jobs' replying to the Brexit 'nay sayers' implying that the UK was going to lose most, or all of our tax receipts from the City, when they all, or mostly, leave the UK with their Investment Bank employees - which is not true, it will be mainly those directly employed in the UK servicing the EU, that MAY find EU financial 'passporting' rights not up for negotiation - WHEN the EU get around to talking about it.

Quentin

You say "Personally I'd be happy to pay more tax for a fairer society. But I think we should close tax avoidance loopholes first."

The problem is if those increase taxes, rather than improving 'stuff', end up on a new small army of new government Quango employees, like in the 2000s, that cost many tens of £billions, or a new NHS computer system that coat over £11 billion, and was scraped as no one asked the front line what they needed/wanted BEFORE development started.

Those higher 2000s taxes didn't improve infrastructure with any great projects I saw, enough homes (especially for the 5 million (1.7 million families) needing social homes in 2009, or 2004 policy nuclear power stations (as the UK faced an energy shortage) etc

Currently the government in waiting is promising '1 million more government decent paid jobs', and will sort out the 'real earnings decline' of public sector workers, yet has no solution to the rest of us, other than higher taxes - looking after the unionised few, not the many, if you will,

So words are not cheap, they can be quite expensive, if higher taxes (that cannot be relied on) and borrowing (when the country is already up to the gunnels in 'it') - mainly goes to supporting a larger government.

Who likes over-simplified, dumbed down analogies? here's another one:

The bar stool breaks.
Ten people enjoy drinking together in a bar. They choose this bar because it is clean, friendly, has good service, and the prices are very cheap (£100 between them for the week!) Most of the drinkers don't waste much time wondering how that is, they just enjoy the beer. They split their weekly bill as follows: The first four (the poorest) paid nothing; the fifth paid £1; the sixth £3; the seventh £7; the eighth £12; the ninth £18; and the 10th man, the richest, paid £59.
One day, the wealthiest man (number ten) began to feel resentful of this arrangement. Leaning back on his stool, he complained about the raw deal he got. "You're right" agreed eight and nine. "We are subsidising the others!" "Well don't expect us to pay more" said five, six and seven "It’s the first four who are free-loading!"
It was decided that from now on, the wealthier six would not buy drinks for the first four. Unable to afford anything, the poor four stop stop turning up at the bar.

The next week, the six remaining drinkers receive a bill of £90. "I can't afford 1/5th of that! How come it is still so high?" five asks the barman.
"Well" explains the barman. "Man One used to help out for free behind the bar when we were busy - didn't you notice?" "He doesn't come to the bar anymore, so I've had to employ another member of staff."
"But why are there so many empty glasses everywhere? And why is the floor so sticky? And the toilets so filthy? Doesn't anyone clean up around here?" Asked six, seven, eight and nine.
"The second two drinkers used to do that" replied the barman."I suppose you'll have to start returning the glasses to the bar yourself from now on. And I'll hire a cleaner soon - but that will push the prices up, of course."
The tenth man leaned back on his stool. "What about number 4? What on earth did she do?"
"She was a joiner" replied the barman. "She used to fix things around here - like dodgy chair legs."
By now, the six drinkers were beginning to bicker about how new bill would be split.
As the tenth man took another sip of his drink, the bar stool broke from under him.

Thea You are referring to public sector jobs as "government jobs", which is deliberately misleading. Teachers, nurses, midwives, bin men, police officers, etc are not an unnecessary luxury. We need them!

"First of all, I'm more concerned with subject of THIS OP and those politicking that the rich are paying LESS tax, so wanted to see someone justifying it - and so far I'm still waiting."
I addressed this in my post. If you want to talk about inequalities in how much tax people pay, you also need to look at inequalities in how much people are able to earn.

Do you support massively raising the minimum wage, like barstool?

squishy - in your analogy the four poorest were undermining the economy by working for free, thus depriving people of a minimum wage job. Pretty soon the bar would be out of business.

So all those who have their income topped up with benefits should strike immediately?
All those working as unpaid carers should just stop? Whose going to sweep up the dead bodies of the old and disabled when they starve to death if the cleaners are on strike?

What I've noticed in the UK though is so many people willing to do the work for a lot less and we end up with a race to the bottom.
WTF? Why do you think people are "willing to do the work for less money"? Has it never crossed your mind maybe they have no choice as they have bills to pay? Jesus. I've seen it all now. Blaming people for being paid too little as if it's their own fault