The poor pay more tax than the rich – and Tories want to cut the highest rate


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.

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16 thoughts on “The poor pay more tax than the rich – and Tories want to cut the highest rate

  1. hayfords

    A few statistics for you.
    Top 25% of earners pay 75% of ALL income tax
    Top 1% of earners contribute almost a third of all the income tax paid
    The percentage of income tax paid by the richest has risen steadily since the top rate of tax was cut.

    Of course the poorest pay a higher percentage of their incomes than the richest. This is due to indirect taxation and thing that they buy. That will always be the case as the higher earners will always have a bigger surplus. It is just a fact of life due to earning more. The relative rates don’t mean anything. The only thing that matters is whether the tax burden on the poorest is too great. The richest are clearly paying the most in absolute terms and the economy would collapse without their 75% contribution.

    1. Mike Sivier Post author

      The point is that the rich have more and therefore should pay more.
      You want the rich to pay a smaller proportion, then you should be campaigning hard for the pay gap between the richest and the poorest in the UK to be reduced – dramatically.

  2. wildswimmerpete

    VAT is the definitive Tory Tax, introduced in 1973 by the Heath administration at a rate of 8%. Now we have VAT at the second highest rate ever of 20% with “VAT creep” now affecting most foods – only a steadily diminishing number of staples are currently exempt from VAT. So the Tory Tax hits the poor hard as food is probably the main item of their budget. Mustn’t forget how another Tory chancellor put VAT on gas and electricity, the other main items in the budget of the poor. So thanks to you Tories, it’s very much a case of having to choose between “eat or heat”. Tell that to the State pensioner hayfords. We need to roll back VAT but of course YOUR party introduced it to ensure the poor paid disproportionately. And when your adored Fuhrer avowed never to increase VAT before the 2010 GE, what was one of the first things he did after slithering into power? HE IMMEDIATELY INCREASED VAT TO A WHOPPING 20%

    1. hayfords

      VAT is not a Tory tax. Before VAT, there was Purchase Tax from 1940. It was replaced due to EU membership where VAT is mandatory. The rate is legally set at a 15% minimum across all EU states. The Labour chancellor doubled VAT to 25% in 1974.

      1. Mike Sivier Post author

        We had a Tory PM in 1940. Tories brought us into the then-EEC.
        The standard rate – on introduction – was 10 per cent. Labour’s Denis Healey actually reduced this rate to eight per cent in 1974, but introduced a higher rate of 12.5 per cent, which he doubled to 25 per cent in November 1974, only to drop it back to 12.5 per cent in April 1976.
        Then in June 1979, after promising not to increase VAT, Conservative Geoffrey Howe abolished the higher rate at the same time he increased the standard rate to 15 per cent. Clearly there’s no point in having a ‘higher’ rate that’s 2.5 per cent lower than your standard rate. This shows exactly how keen the Tories are on pushing regressive taxes onto the poor.
        Norman Lamont increased the rate to 17.5 per cent in 1991, and in 1992 (after another election promise not to increase VAT) introduced it on domestic fuel and power (another blow against the poor), at eight per cent.
        Gordon Brown (Labour) reduced VAT on many items including domestic fuel and power to five per cent.
        In response to the Great Recession, Alistair Darling (Labour) reduced VAT to 15 per cent (the minimum EU rate) as a temporary measure to help keep the economy in good health. This tactic was successful.
        Then in 2010, after another election campaign in which they claimed they would not increase VAT, the Conservatives increased VAT to 20 per cent.

        You can see that the Conservative Party increases VAT and Labour cuts it back. Therefore it seems the claim that VAT is a Tory tax has more truth to it than not. Also we can all note that you are extremely selective with the information you provide.

      2. wildswimmerpete

        BONG! Purchase Tax was only imposed on big ticket items like furniture, and luxury items like television, radios, record players, cosmetics, perfumes and fur coats. The intention was to deter the purchase of those items because such consumption diverted scarce resources deemed to be essential for the war effort. Bear in mind hayfords I lived through the period of PT. PT was also charged on valves for radio and TV, I’ve got quite a few valves in their cartons plainly marked with the PT charged. PT wasn’t charged on essentials like food, unlike today’s Tory Tax which was, and still is, designed to keep the poor in penury.

      3. hayfords

        It not a Tory tax as whoever was in power at the time would have had to introduce it. It is a legal requirement for membership of the EU.

      4. Mike Sivier Post author

        You’re avoiding the point: The Tories have seized on this tax and gleefully take any opportunity to increase it that they think they can get away with; Labour cuts it whenever possible.
        That’s why it’s a Tory tax.

  3. Andy

    Mike – If a family has an income of £12,000 a year they will get an tax free allowance of £10,600 which means that tax at 20% will only be levied on £1,400 which Imake £280.00 and leaving a net income of £11,700…not £9, 600.
    I have also read that the top fifth account for 43.7% of the total nations tax and that ıf someone earns £30,000 a year with no credits their tax will be £3,800 or 13% of their income. However someone who earns £200,000 will pay £73,643 or 36% of their income. so the latter earns approximately seven times as much but actually pays eighteen times as much in tax.
    As you say fıgures are only representative………

    1. Mike Sivier Post author

      Yeah – you read the part where I said these were representative figures, but still had to make that point about the tax-free allowance? I was showing the difference in the amount of money left for people at opposite ends of the income scale – writing it large, if you like.
      The ONS figures seem intended to be inclusive of all taxes paid, not just income tax. The interesting part for me is where the top fifth end up paying less than their income tax bracket would suggest. Is this based on all their income or just their taxable income?
      The more I think about it, the more it seems someone isn’t being straight here. I’ll have a look at what the ONS has to say and report back.

      1. Ian Buchan

        I agree with Mike here as all things ARE relative.When a person is fortunate enough to be in the High Earning bracket he can afford easily that which his poor cousin cannot. The list on this endless from the Best Accountants to the Best Health Care and the healthiest food and way of life. The Accountants are tax deductible as are a number of other expenses. The Poor must always foot their own Bill. The Tories have continually bombarded us with Fairy-tale economics so many times that they now believe the lies themselves.

      2. Andy

        I fully accept that those in the higher bracket have a greater freedom on what and where they spend their money…but as they have earned it and consequently pay, as I pointed out, proprtionately considerably more in tax, this is a fact of life under any government. The point I seekıng to make was that Mike was working from a flawed base in ignoring the tax allowance to the lower income earner.

      3. Mike Sivier Post author

        But they don’t pay more in tax – that’s precisely the point!

      4. Andy

        In the example I gave earlıer, wıth no tax credıts and a 40% upper limit, the £30,000 a year earner pays 13% of it ın ıncome tax, while the £200,000 person pays 36% of hıs or hers.. Now ın order for ıt to been ın proportıon they should eıther pay both pay at 13% or at 36%. As ıt stands the £200k a year ındıvıdual earns seven tımes as much but pays 18 tımes as much ın ıncome tax….as ı saıd proportıonately consıderably more.

      5. Mike Sivier Post author

        That’s not the whole story and you should know it.
        Take a look at the ONS data and you’ll see that, thanks to those indirect taxes the Tories love so much, the poor pay more.

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