The UK’s tax distribution
Someone on Question Time the other night—I forget who—stated that the only way to recoup significant levels of tax was to tax the poor. I decided to do some analysis, and found that it’s largely true.
As of 2004/5, according to HMRC, the mean income of taxpaying individuals was £22,800, the median being a good deal lower than this—61% of taxpayers earned £20,000 or less. If every pound of income generated the same amount of tax, then 52.3% of tax would have come from those earning £30,000 or less six years ago. And less than 25% of tax would have come from those earning £50,000 or more.
Now arguably, the greater one’s disposable income, the more tax those pounds generate—some of the essentials in life are exempt from VAT. But this effect will be marginal.
So the panelist was pretty much right. To have a significant bearing on the amount of tax brought into HM Treasury (via the front door of 100 Parliament Street), you have to go after the low-end of the pay scale.