Tuesday, 24 April 2012

Who pays income tax?

I received this chart from Jim. It shows, as he suggested in an earlier comment, that the top 1 percent of wage earners pay 27 percent of all income tax receipts. The bottom 50 percent of earners pay just over 10 percent of total income tax receipts.

Income tax only accounts for just over a third of total tax receipts, so the overall tax burden on the lower 50 percent is higher. Taxes such as excise duties and VAT tend to be highly regressive.

Thanks Jim for the chart. It is much appreciated. If anyone else finds something interesting, please send it to me here.  I am always looking for interesting content for my posts.


Jim said...

According to this research (http://www.bbc.co.uk/news/business-15519727) the richest 20% pay 5.3% of their income in VAT, whereas the poorest 20% pay 9.8% of their income in VAT, so yes it is regressive.

But the top 20% have around 50% of total income so the amount of VAT they pay will be considerably more than the poorest 20%, who have less than 2.5% of total income. Ergo the wealthy (top 20%) are contributing 5% of 50%, whereas the poorest are contributing 10% of 2.5%. So in cash terms the wealthy are paying a huge amount of VAT as well as their income taxes.

If you add in corporate taxes, which undoubtedly fall more on the the top 20% than the bottom 20%, then you can see that if you took the top 10-20% of the wealthiest people out of the tax revenue equation, there wouldn't be much left. Probably about a third to a half of what is collected today.

Good luck in providing the level of services everyone wants on that amount of revenue. The vast majority of people in this country should thank their lucky stars that there are so many wealthy people in this country that pay so much tax on their behalf. Without them we would be less than broke, we would be in anarchy.

But as is always the way, rather than be grateful for what you have, people always take it for granted and want more. 'The rich must pay!' goes up the cry. Well, one day the rich may stop paying altogether, and just melt away into the darkness a la Atlas Shrugged, and then where will everyone be?

Siobhan said...


Great site! I'm trying to find an email address to contact you on to ask if you would please consider adding a link to my website. I'd really appreciate if you could email me back.

Thanks and have a great day!

Alice Cook said...


ukhousebubble at AOL dot com