As the rich are told they will pay most to repair the public finances after the recession, Michael Blastland, in his regular column, digs out a provocative fact about where the tax burden falls. But don't jump to any conclusions.
Imagine all the nation's income tax sitting in a pile in the Treasury, a great mountain of ready cash (£147,856,000,000 in 2008-09, according to Revenue and Customs).
What share of that pile was paid by those taxpayers with the highest one per cent of incomes?
Everyone has an opinion about the burden of taxation, but how many know where it falls?
The answer is
We cheated. The answer is none of the options above. The people with the top 1 per cent of incomes pay very nearly a quarter of all the income tax, as the chart shows. So option d - the highest available - gets points. The other options are at best half the true amount.
We can also see from the chart that people with the top 10% of incomes pay more than half the income tax. (
See link here
What does it tell us? That's where facts become interesting. Because you might draw all sorts of conclusions from this number. You might say that the rich pay plenty already; or that it simply shows how rich the rich are. You might be shocked by how much the state depends on the rich, but that might just confirm your belief that what's unfair is not the tax people pay but the incomes they begin with.
Or will you switch focus and argue that it reveals how many of those in the middle do not pay the lion's share of the welfare state, contrary to what some believe, but are in fact heavily subsidised by those at the top?
Happy to pay his share?
So are the middle classes spongers? Other data suggest that people receive services from the state greater in value than the tax they pay up to about 70 per cent of the way up the income scale, though that calculation is difficult and depends as much on households' composition - whether they have children at state school, are retired etc, - and makes no allowance for how efficiently services are provided.
How we react to provocative data also says something about us. So here's another multiple choice question, not about tax, but about you. When you saw the answer, did you
a. Change your mind in any way about the tax burden?
b. Assimilate this fact into your existing political opinion as fast as possible?
c. Say that this number alone doesn't tell us nearly enough so how can I know what to think?
It doesn't, for example, tell us who pays the Vat, excise duty, or other taxes, it is only about income tax, which is the most progressive of taxes. It doesn't tell us what share of their income each group pays in tax - which will be some people's measure of fairness.
The Office for National Statistics' annual publication about the effect of taxes and benefits (see internet links, above right) suggests that most people actually pay a similar share of their income in taxes when all taxes are taken into account, even up to the top 10 per cent as a whole.
But my guess is that a lot of us are tempted by b: to think less about the data than how it can be used for our side of the argument, rather than to set out by asking the open question implied by c: what data would I need to form a proper opinion?
For this reason, an economist acquaintance of mine says - provocatively - that the facts do not matter to political argument. If, like this column, you assume value in trying to know and understand the data, that's a hard conclusion to swallow. Is it true?
Where does your money go?
A minor political scandal is how hard it is for people to see easily, in an accessible form, how tax is spent, compare previous years, break it down regionally, and so on.
The Government Spending (Website) Bill would have created a free, wide-ranging, searchable website of all spending by government and executive agencies. But not enough MPs turned up to vote, from any party, so the Bill failed. Never mind, it is only the sort of basic information that citizens might use to make sense of probably a good half of all political argument.
In the US, A Federal Funding and Accountability Transparency Act requires official bodies to publish figures on spending in a single place.
In the UK, the only attempt to do this that I knew of was ukpublicspending.co.uk by Christopher Chantrill, a writer based in the US. (See link, above, right on this page.)
Then last week, I was contacted by the Open Knowledge Foundation, a charity, to say they had trawled official data to identify where the money goes and turned this into various visualisations. Readers can see them at WhereDoesMyMoneyGo.org (Again, the link is above, right)
Michael Blastland will be examining the issue of tax and the rich further in More or Less, broadcast on BBC Radio 4 on Friday 18 December at 1330 GMT.
Here is a selection of your comments.
The observation that the top 10% of earners pay 50% of all income tax begs the question, what proportion of the nation's wealth do they own? And how much of that is above the basic standard of living costs we all face and the normal standard of living costs for the population? Julia, London
Of course the rich pay a high percentage of the total tax bill, but they receive a large slice on National Income. When you look at both direct tax (income) and indirect tax (VAT, NI, Council tax), the top decile group pays about 33% of its income in tax --- the figure for the bottom decile is 47%.
George Irvin, Brighton
One argument about who pays the most tax is that the rich should pay more, because they require the use of our infrastructure to create their wealth; be that the public transport system for getting people to work, the health service for ensuring that employees don't have productivity problems on account of poor health or the armed forces to give them a stable environment in which to make their money and much more. With direct and indirect consequences, the rich benefit from government spending more than they think.
Graeme Phillips, London
The income tax charts show how easily the government could afford to drop income tax for the bottom half of earners, creating a massive stimulus for the economy. They won't, of course.
The education chart shows increasing expenditure, but doesn't account for inflation. The sums should be reported in pounds adjusted for a single year, or reported as a proportion of GDP, or total government expenditure, etc.
It would have been interesting to know the corresponding salaries that define the income groups though rather than defining them by a percentage. As I reader, I want to understand what group I am in.
Jonny Crabb, London
What is more startling is that using HRMC's Table 3.5 (Tax payers only), it is clear that 7% of the population earn over £50,000 a year and contribute over 47% of the income tax for the whole tax paying population. Also, less than 1% of the population earn over £150,000 a year and these people contribute over 22% of total income tax. The scary conclusion I come to is that a small wealthy contingent of people leaving the country can have a large impact on the overall income tax take and thus everybody else would need to pay significantly more to cover the loss.
The rich do a lot more than pay taxes. They have much more money than the middle classes, who tend to have more debt, and the poor, who can't afford either. That money doesn't sit in a pile doing nothing - it's being invested in the economy, either directly by buying shares, bonds or owning companies, or indirectly invested by the bank that is looking after it - because that's how your bank interest is earned. Indirect investment by banks is where the majority of growth comes from.
Tom Foale, High Wycombe
Unfortunately the article fails to mention that the top 1% of earners earn 12.4% of the total income, i.e. they earn over 12 times the average person. Therefore, proportionately they are paying just under twice as much tax as the average person on each pound of their income. Seems to me that they are getting a very generous deal.
Robin Bangerter, Market Harborough
It's not those who pay tax, it's those who don't. The so-called non-doms. There are two ways to deal with this: 1) tax all assets, wherever they are, or 2) Make entry for all non-doms restricted to 10-14 days entry per year, not 90, as now.
Harry Cozens, Cardiff
I disagree with how much tax the rich pay. It ignores the legitimate loopholes. For example, if I were to work as a consultant with my own limited company, then my company (me) can charge my client a fortune. I then pay my employee (also me) a pittance, and the employee consequently pays even less tax and NI. My company (me) then pays my shareholder (erm...me!) a huge dividend, at less tax and no national insurance. The result is, that although I actually earn a significant wage, technically I earn a pittance, pay tax and NI on it, and get a large dividend on which I pay capital gains. Obviously, if my wife also happens to be a shareholder in my company, then I can split the dividend with her and we both pay less capital gains.
That's why there are probably a significant number of 'actual' high earners who technically appear in the low earners box. That's why your numbers don't stack up.
As a basic rate taxpayer I'm embarrassed to be subsidised by higher earners. Why should they pay more tax than me if they've earned fair and square? Tesco won't sell us the same loaf of bread at a different price, because we're after the same commodity. It's the same with tax. Higher earners who earn more because they work harder, have taken more risks or are just simply cleverer deserve to keep what they earn.
Mike Call, Cambridge
I am one of the "rich". I spend all my earnings on tax, my largest single expense, housing and schooling, and save little. With the coming tax rises however, I have finally had enough. I'm going abroad to live in March.
The political debate in this country just seems to be about how much the population want to stuff me, and other people like me. I hear from indignant people who pay next to nothing into the system, how unfair it is that people like me don't pay for everything. It is not the same elsewhere, indeed quite the opposite. I am not alone either. How many more after the next election? I do like Britain, I was born here. But I don't love anywhere enough to sacrifice my earning life for. Incidentally, I'm not a banker.