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tax

The UK’s poorest families give more money to the government in tax than any other income group – and almost half of Tory MPs want to increase the inequality by cutting the top rate of tax yet again.

According to the Office of National Statistics (ONS), the poorest fifth of households paid 37.8 per cent of their income in taxes last year, while the richest fifth paid 34.8 per cent.

That’s not the whole story, of course – if you’re poor and you pay nearly two-fifths of your income in tax, that leaves very little for necessities like food, water, heat, light and rent/mortgage whereas, if you’re rich and you pay nearly 7/20 of your income in tax, you’re unlikely to be feeling any kind of pinch.

Say a poor family receives £12,000 per year. Tax would account for £2,400, leaving £9,600 for everything else. What’s the earnings threshold for the top tax bracket – £150,000? A family receiving that amount would pay… actually they’d pay 40 per cent of it, according to the law, but that would still leave £90,000 – nearly 10 times as much as a poor family and no problems at all in making ends meet.

It should be stressed that these are only representative figures. To be honest, the statistics are up for question: How many of the top fifth of earners avoid paying tax via legal schemes, designed for this purpose? How much do we all pay in indirect, or hidden, taxation? How many variations have been included in the ONS figures?

George Osborne is said to be considering a cut in tax credits in his July budget, meaning the poorest would lose part of a vital support system propping up their earnings. David Cameron has said he expects employers to increase pay, but he is offering neither carrot nor stick to encourage this, therefore they won’t. So the poor would pay more.

Meanwhile, 160 Tory MPs have demanded that the top rate of tax be cut from 45 per cent to 40, meaning the rich would pay less.

Not only would the poor be plunged further into poverty and debt if these measures were enacted next week, but public services would also take a hammering as income to the Treasury plummeted.

Perhaps the worst indictment of the situation, though, is the fact that – under the last Labour government – the inequality was worse. The poor paid more than 38 per cent of their income while the rich contributed less than 34 per cent.

Follow me on Twitter: @MidWalesMike

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