Right-wing lies on tax


3:11 pm - July 31st 2009

by Newswire    


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Tax in this country is regressive.

The best off have the best tax deal.

They also willingly use the system.

Inequality has risen in the UK. The tax system has encouraged that as it has shifted to indirect taxes.

UK indirect taxes are horribly regressive.

There are the conclusions Richard Murphy derives from a detailed analysis of tax injustice in the UK.

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right wing lies?

Umm, remind me again which party has been in power for the past decade.

Ummmm… a right wing one? One that has failed to challenge the Thatcherite settlement on Unions, Industry and, judging by this, one that has failed to make the balance of taxation fairer.

I think Richard Murphy was talking about what the right was saying, not who was in power. What has who was in power got to do with the price of eggs?

As anyone who has been reading Chris Dillow would know.

The direct tax system is progressive. The indirect tax system is hugely regressive. The benefits system is progressive. Overall, as a whole, the system is mildly progressive (yes, it does reduce Gini).

What slightly worried me is that an accountant has only just found this out.

And as Chris Dillow has also repeatedly pointed out, the reason for all of this is that you cannot have a large state with the rich paying for it all: there just aren’t enough rich people and they just don’t have enough money. If you want to have a large state then you’ve simply got to tax the poor as well for cumulatively, although not of course individually, that’s where the money is.

Tim

What crap!

a) This was data from a new report, hence its timeliness

b) We have ample rich people: we don’t tax them nearly enough – as the data graphically shows

(b) is the reality you deny

While you do social injustice will continue

Richard

I’ll leave aside responding to the scatology shall I?

“b) We have ample rich people: we don’t tax them nearly enough – as the data graphically shows”

As I pointed out at my own blog.

“Hmm, average income in the top decile is around £90,000 (no point in being more accurate than that throughout). Cut out everything they get from the State and everything they pay to the State and you get £65,000 a year. There are some 2.5 million households in that top decile.

So, total income of “the rich” is £225 billion a year, of which they pay £63 billion or so a year to the State (nett of course, taxes out and benefits in) leaving them with about £163 billion a year to wave in the faces of the downtrodden poor.

How much does the whole system cost a year? Around £660 billion isn’t it?

So, we could take all the money off the rich, every penny (and of course we could only do this once as the next year they’d all bugger off) and we’d be, umm, lessee….£660 minus about 60 they already pay minus another 160 ish that we let them keep so far….what, £440 billion short of what government costs us?

And that’s why we tax the poor, because the rich simply don’t have enough money to pay for the State we already have.

If you want to have a State that the poor don’t have to pay for, but the rich carry all the burden, then you need a smaller State than the one we have.”

(Those numbers are taken from the very same report Richard is referring to.)

I’d just add one more thing to that. Sweden has, as we all know very well, higher income tax rates on the high income earners than we do. What you don’t usually get told is that they also have a higher VAT rate and higher excise taxes: yes, their direct tax system is more progressive and their indirect tax system more regressive than ours.

You simply cannot get around the fact that there aren’t that many rich people and so, cumulatively, they don’t have all that much money. Certainly not enough to pay all the expenses of a large state sector. It’s just not possible.

Sure, we can all argue about whether they should pay for more of it or less of it but it’s a simple fact, not an opinion, that we cannot get them to pay for it all.

6. Luis Enrique

Richard (and anybody else),

you might find some of Chris’ blogs on this topic informative. Examples here and here

You do realise it’s all a trick of the maths. If we stopped all indirect taxes on the bottom 20% and reduced cash benefits by the same amount (to leave them in the same net position) their tax rate would be 31.3%. But of course, you’d complain if we reduced their benefits even if all direct taxes were stopped.

It a classic case of Gordon giveth with one hand, and Gordon taketh away with the other. Look at the numbers. The bottom 20% receive an average of £6,453 per year in cash benefits and pay an average of £4,302 per year in tax. That is an average of nearly £360 per month tax paid by the bottom 20% of earners.

And you’re blaming the RIGHT wing? Go figure.

Mark M

Which shows how easily deceived you are by stats

Aggregate data does not reflect underlying individual circumstance

The benefit system seeks to do so

Your proposal would enrich some and leave many – especially children – even worse off

Is that your desire?

Richard

“Aggregate data does not reflect underlying individual circumstance. The benefit system seeks to do so”

But at what cost? According to Budget 09, toal spending on social security benefits and tax credits was £155.9bn in 07-08. According to these ONS figures, the 25.289m households received cash benefits totalling £120.7bn. Would you like a game of find the missing £35bn?

I accept that means testing and providing benefits to suit is a virtuous goal. The problem is that it creates a system in which great swathes of potential benefit money goes into the pockets of box tickers who determine who gets what payments.

Mark M

Like Tim you presume that sample based data is complete: it is not, it is sample data

I have also not double checked your figures but do not dispute that the data does not add up to expected totals – on which I will blog more in due course

Richard

Where above (or anywhere else at all) have I claimed that sample based data is anything other than sample based data?

But the point of sample based data is that it’s meant to represent the population. If that £35bn has disappeared simply due to sampling error then we would really have to question the worth of the entire data set.

Likewise if my conclusions are incorrect because the sample doesn’t represent the population, how can you be certain that your conclusions aren’t similarly affected?


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