And he’s shocked I tell, shocked.
He finds that the direct tax system is progressive, the indirect system highly regressive and the allocation of benefits is progressive. Gini on market incomes is somewhere over 0.5 and at the end of the money shuffling is 0.34 or so (don’t take those as being too accurate, I’m just eyeballing).
The system as a whole is progressive: as anyone who bothered to read Chris Dillow could tell him.
And what should we do about it?
The reality is that now is the time for progressive taxation reform – to make sure that the richest in the UK pay a fair share for the society we live in, because they do not right now. And that has to change.
OK, let’s take that and see where we can go with it. This is the original report that everything comes from.
Hmm, average income in the top decile is around £90,000 (no point in being more accurate than that throughout). Cut out everything they get from the State and everything they pay to the State and you get £65,000 a year. There are some 2.5 million households in that top decile.
So, total income of “the rich” is £225 billion a year, of which they pay £63 billion or so a year to the State (nett of course, taxes out and benefits in) leaving them with about £163 billion a year to wave in the faces of the downtrodden poor.
How much does the whole system cost a year? Around £660 billion isn’t it?
So, we could take all the money off the rich, every penny (and of course we could only do this once as the next year they’d all bugger off) and we’d be, umm, lessee….£660 minus about 60 they already pay minus another 160 ish that we let them keep so far….what, £440 billion short of what government costs us?
And that’s why we tax the poor, because the rich simply don’t have enough money to pay for the State we already have.
If you want to have a State that the poor don’t have to pay for, but the rich carry all the burden, then you need a smaller State than the one we have.