The Equality Trust has decided to favour us with another whinge about just how appalling we are in our inequality and the treatment of the poor. The release comes in the house magazine for the worriers, The Guardian:
“The public are misled about this country’s tax system. They think households with the highest incomes pay more than those with the lowest, whereas the opposite is the case. Even more concerning is how little our current system matches people’s preferences on tax. There is clearly strong support for a system that places far less burden on low-income households,” he said ahead of the “Unfair and Unclear” report. “We’re calling on all parties seeking to form the government from 2015 to commit to the principle that any changes in tax policy are progressive.” Not a single respondent in the poll knew how much the richest and poorest paid in tax. On average the public underestimates what the poorest 10% pays in tax by 19 percentage points, believing they pay just 24% of their income in taxes, the Equality Trust said. When asked about how to make the tax system fairer, on average, people said the poorest 10% should be taxed just 15% of their income, or 28% percentage points less than they currently are. They believe the richest 10% should be taxed 39%, or 4 percentage points more than now.
Hmm. Those figures at the top are from here. Agreed, it’s quintiles not deciles and total income there means including benefits in kind (health care and education). But those poor households appear to make £5,000 a year by their own effforts and then get to command resources of £15,000 a year. And if your total income, after the influence of the tax and benefits system, is three times your market income then I would describe you as having a tax rate of minus 200%. Meaning that looking just at the nominal tax rate is extremely misleading.
Well done to the Equality Trust there.
But let us take the specific issue they attempt to highlight seriously for a moment. It’s actually what people think the various groups ought to be paying. And at the top end we’re pretty close to what people think “the rich” should be paying. I’d certainly, given how appallingly out of control most state projects (think Olympics for a moment) get, accept a 4% error as being pretty good for government work.
So the Great British Public don’t think that the rich are paying too little. But they do think that the poor are paying too much. At which point we here at the ASI would be delighted to support the plan to create a more progressive taxation system. We could start by lifting the income tax and NI limits to perhaps £12,500 a year. The level of the minimum wage. This would reduce the tax burden on the poor, most certainly. It would also have the handy attribute of converting the minimum wage into the living wage (the difference between the two being only that vast amount of tax we charge to low incomes).
But we would insist on noting that thought that the rich shouldn’t be paying more. It is, rather, that everyone should be paying less. This means that we get to have the most lovely fun deciding which tens of billions of pounds we should be cutting out of government spending in order to make the tax side of the P&L match up with the public’s democratic desire for a reduced tax burden on the poor.
So, remarkable as it may seem, we’re fully behind the Equality Trust on this one. The public are demanding tax cuts and smaller government and what’s not to like about that?