[psychomansam]

I mean who funds the author as it is his interpretation you're quoting.

I always struggle to understand how the lowest decile is supposed to have direct and indirect taxation @ c. 50%

According to wkipedia (I know not exactly the gold standard) has the second lowest decile on £15k so I think it's fair to suggest that the lowest decile has an income of c. £10k.

No IT on £10k is £nil
Ni contributions about £350
Council tax, let's be generous and say £700 so that's £1000 of direct taxation.

So where does the other £4000 worth of indirect taxation come from from £8650 income?

I've yet to see any cogent answer to this question.

I don't know the exact figures, but I know that the 'sins' are engaged in heavily by those on the low incomes. Alcohol, especially spirits, is very highly taxed. Cigarettes and gambling as well.

VAT is obviously a very controversial tax and raising that to 20% has hit some of the poorest. It has something of an inverse effect to that desired at the minute in some cases: it tends to be that the middle classes buy VAT-free fresh produce while the poorest buy a lot of VAT-laden 'junk'.

Fuel is obviously massive, though that's a slightly more progressive tax as most on low incomes won't pay it. That said, I don't know how far 'indirect' taxation is being taken. If it's used to take into account a % of the cost of buses, taxis etc, (and if cost of goods is taken to include taxation on the companies etc) then I can certainly understand how taxation can be ~50%.

Obviously, people on low incomes are getting a huge amount back in return for the tax they pay in (education, healthcare, services, benefits), but I'm sure we could make things more progressive.

[Sloper]

I know maths and logic aren't popular amongst lefties but, for the total indirect and direct taxation for the lowest decile to be 50% then they'd have to be spending all their income after council tax on VAT & duty paid items and for VAT & duty to be @ 60%. 

Clearly this is impossible. (as they'll need to pay rent, buy food, gass +/or electricity and so on.

So where does the 50% come from?

Ohh and I thought i was a troy bastard myth that the poor spent all their cash on booze fags and ready meals?

[slackline]

I know maths and logic aren't popular amongst lefties but, for the total indirect and direct taxation for the lowest decile to be 50% then they'd have to be spending all their income after council tax on VAT & duty paid items and for VAT & duty to be @ 60%. 

Clearly this is impossible. (as they'll need to pay rent, buy food, gass +/or electricity and so on.

So where does the 50% come from?

I don't know, but based on Chart 12 from the linked article its more like 35% of their income is indirect tax, whilst ~11-12% is direct taxation.  Rounding this up to 50% might be an easy/lazy way to type, but it has the unfortunate impact of distorting the picture.  Why not round down to the nearest 5% and write 45%?  Its easier to just be as accurate as possible as it distorts things less.

Since the figures come from the Office for National Statistics they should be available.  In ten minutes I couldn't find the exact article Chart 12 comes from but did find a related one on The Effects of Taxes and Benefits on Household Income, 2011/12 (10 July 2013) within it on page 21 in Section 11 : Quality and Methodology Information it links to Quality and Methodology Information which in turn on page 2 under How the Output was Created states (with link although it doesn't resolve) that the numbers are derived from the Living Costs and Food Survey that the ONS appear to have conducted.  A quick search on their site for this term leads to the Family Spending, 2014 Edition.   The Appendix B contains the methodology and states that the included data was from 10354 households.

I've not read it in detail, but I put greater faith in statistics that are based on actual data from real surveys than those done on the back of a cigar packet.  If you want to know the numbers for yourself the above reading should help and in other instances can usually be found  with relative ease.

These are minutiae though and whilst it is good to question the source of numbers (the ONS are pretty reliable and transparent) its a digression from the larger picture which is that the poorest are suffering the worst from the "austerity" measures that "we're all in together" whilst those at the top are barely noticing that a pinch is occurring, in part through the choices in taxation rates and for a subset even less so since the seek to minimise their tax liability.  In a civilised society those who are richest could perhaps pay a little more (e.g. the 5% they were given back when the highest income tax band was reduced)  to help those worst off, without any real detriment to their standard of living at all.

[slackline]

The Appendix B contains the methodology and states that the included data was from 10354 households.

  skim reading that was the eligible number, they got usable data (including 232 partials) from 4993 households.

I'd still trust those responses over calculations done on a cigar packet.

[petejh]

It's a bit off-topic but..

... its a digression from the larger picture which is that the poorest are suffering the worst from the "austerity" measures that "we're all in together" whilst those at the top are barely noticing that a pinch is occurring, in part through the choices in taxation rates and for a subset even less so since the seek to minimise their tax liability. 

Isn't that exactly what you'd expect to happen? That's one of the points of trying to become rich - you're buffered far more from the vicissitudes of life when you're wealthy.

Whether anyone actually merits being rich or poor is another issue.

In a civilised society those who are richest could perhaps pay a little more (e.g. the 5% they were given back when the highest income tax band was reduced)  to help those worst off, without any real detriment to their standard of living at all.

Why? And why stop at 5%? Why not ask the wealthiest to charitably give away 15% of their wealth to the poorest - on the logic above it still wouldn't make the wealthiest people feel 'pinched'.

For the sort of altruistic action you describe to be adopted as official policy (versus benevolent outliers) wouldn't there need to be widespread acceptance that the wealthiest people don't merit their level of wealth? I don't see that happening voluntarily.

[psychomansam]

For the sort of altruistic action you describe to be adopted as official policy (versus benevolent outliers) wouldn't there need to be widespread acceptance that the wealthiest people don't merit their level of wealth? I don't see that happening voluntarily.

Widespread acceptance of this lack of merit or 'deserts' (deservedness) would be in the benefit of the majority. I suspect it can be accepted voluntarily, but that it would require a degree of prior cultural change and re-education. This leads to something of a chicken-egg problem. Clue: You won't get either chicken or egg while the average punter is reading the Daily Mail or Sun and listening to the BBC.

If I ever get to do a PhD in philosophy, it'll be related to this issue.

[slackline]

Why?

Because its depressing to see other humans destitute, hungry and suffering. 

And why stop at 5%? Why not ask the wealthiest to charitably give away 15% of their wealth to the poorest - on the logic above it still wouldn't make the wealthiest people feel 'pinched'.

A simple suggestion based on nothing other than there has been a 5% reduction in recent history.  Another approach which would bring in orders of magnitude greater cash than is defrauded by the benefit cheats* that politicians love to abhor is reforming tax law so that the various forms of legal corporate and individual lax avoidance are no longer possible without the prospect of hefty fines and/or custodial sentences.  Could even have another tier of taxation for the uber rich.



Denmark and Sweden have quite high taxation rates (>50%) for high earners.

For the sort of altruistic action you describe to be adopted as official policy (versus benevolent outliers) wouldn't there need to be widespread acceptance that the wealthiest people don't merit their level of wealth? I don't see that happening voluntarily.

No, just acceptance that those who earn over a set amount are expected to sacrifice a slightly larger proportion of that part of their income.

This is not the same as people not meriting their wealth, which would involve taking everything earnt above X amount away from them...since they don't deserve it.



* Benefit fraud is estimated at around 0.7% of the total paid out this is £1.2bn (some estimates put it at £2bn[1]) compared to £5bn lost through tax avoidance[2] (in conjunction with illegal avoidance the loss of revenue is in the region of £14bn[3]). Its utter bullshit that the papers and media bang on and on and on and on about benefit fraud when in reality its scale is negligible. 

[1] http://blogs.channel4.com/factcheck/factcheck-qa-benefit-fraud-perspective/15796
[2] http://www.independent.co.uk/voices/comment/its-time-to-bust-some-myths-about-benefit-fraud-and-tax-evasion-9520562.html
[3] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/118530/annual-fraud-indicator-2012.pdf (see Page 12)

[Sloper]

Slackers, I'm not disputing the data as it is presented, when I am unable to reconcile is how that data can be reliable.

The lowest quintile have a disposable income of £11,500 and pay £3500 in indirect tax i.e. a rate of >25%

If we take £1000 for council tax then this is still just under 25%.

Since the only things with >20% of tax & duty are booze and fags this means that to get to 25% of indirect tax then the poorest 1/5th must be spending all their money on booze & fags which cannot be correct.

As below.

Food of which 25% is vat rated, £2000 per year so £100 per year VAT
Gas & Electric £800 per year 5% VAT = £16 per year
Rent £4000 per year 0% rated.
Mobile phone & internet £500 per year 20% rated £100 VAT (I don't know if this is vat rated but assume so for the purpose of discussion)
Petrol £1000 and let's say 35% £350 per year.
Clothes & misc £1000 per year so £200 vat

So that's £9300 spend and £766 in indirect tax.

So that leaves £1200 spend and £1800 in indirect tax. 

[slackline]

Slackers, I'm not disputing the data as it is presented, when I am unable to reconcile is how that data can be reliable.

The data is from respondents to a survey, see the questions they are asked and seek out the raw results if you think they are unreliable.  I won't do this for you.

The lowest quintile...

A massive short coming of categorising continuous variables is that readers assume that everyone within that category is the same.  They are not.

have a disposable income of £11,500 and pay £3500 in indirect tax i.e. a rate of >25%

Where are you getting this figure from, could you please cite/link to the source?  Some within that quintile might have a disposable income of £11,500, many others will have less than that yet still have to buy/pay for many items which carry VAT* and in turn that proportion will be a higher percentage of their disposable income.  Within the quintile it averages (most likely mean) to the figures in the chart 12 (although it uses deciles not quintiles_.  The same will be true for each other category.


* Even though much food doesn't carry VAT its price has increased in recent years as a consequence of the increase in fuel prices that retailers pass on to the consumer.  Indirect-indirect.

Since the only things with >20% of tax & duty are booze and fags this means that to get to 25% of indirect tax then the poorest 1/5th must be spending all their money on booze & fags which cannot be correct.


As below.

Food of which 25% is vat rated, £2000 per year so £100 per year VAT
Gas & Electric £800 per year 5% VAT = £16 per year
Rent £4000 per year 0% rated.
Mobile phone & internet £500 per year 20% rated £100 VAT (I don't know if this is vat rated but assume so for the purpose of discussion)
Petrol £1000 and let's say 35% £350 per year.
Clothes & misc £1000 per year so £200 vat

So that's £9300 spend and £766 in indirect tax.

So that leaves £1200 spend and £1800 in indirect tax. 

Could you please quote your sources/link to them or are they numbers you've picked yourself?

You want to get to the bottom of where the figures come from so please go and read the ONS research articles I spent the time finding and linking to which contain those details and report back on the faults and problems with their chosen methodology and the responses that they had.  I won't do this for you.

[Sloper]

The income & tax figures are from the source that you linked to.

The figures I've quoted are absolutely 100% accurate, I made them up so they must be true.

This is the point, even the people in the lowest quintile or decile have to pay rent, council tax, pay for fuel, electricity and so on. When you model their spend and the relevant tax rate it just isn't possible to come up with anything like the 35% rate of indirect taxation.

[slackline]

This is the point, even the people in the lowest quintile or decile have to pay rent, council tax, pay for fuel, electricity and so on. When you model their spend and the relevant tax rate it just isn't possible to come up with anything like the 35% rate of indirect taxation.

The ONS have done using data they collected so I'd question them and their methods (which are documented in the links) not me to satisfy your curiosity as to how they arrived at this figure.  They may well take into account more lines of indirect taxation than you have considered and hence how they have a different figure to the one you think that fits (this is the most likely reason why you disagree with them).  So if you want to know how they get that figure....read their methods and look at the responses they received (if they are publicly available) and critique them.