The Effects of Taxes and Benefits on Household Income

[3rdRock]

Report published today by The Office For National Statistics

The Effects of Taxes and Benefits on Household Income, Financial Year Ending 2014

Main points

Before taxes and benefits the richest fifth of households had an average income of £80,800 in 2013/14, 15 times greater than the poorest fifth who had an average income of £5,500.

Overall, taxes and benefits lead to income being shared more equally between households. After all taxes and benefits are taken into account the ratio between the average incomes of the top and the bottom fifth of households (£60,000 and £15,500 per year respectively) is reduced to four-to-one.

Cash benefits made up 57.2% of the gross income of the poorest fifth of households (£7,400), compared with 3.5% (£2,900) of the income of the richest fifth.

The richest fifth of households paid £29,200 in taxes (direct and indirect) compared with £4,900 for the poorest fifth, though both groups paid a broadly similar proportion of their gross income (34.8% and 37.8% respectively).

Overall, 51.5% of households received more in benefits (including in-kind benefits such as education) than they paid in taxes in 2013/14. This is equivalent to 13.7 million households. This continues the downward trend seen since 2010/11 (53.5%) but remains above the proportions seen before the economic downturn.

Overall levels of income inequality in 2013/14 were broadly unchanged on other recent years. However, inequality among retired households has increased, with the Gini coefficient for disposable income rising to 27.2%, up from 24.3% in 2009/10.

The median disposable income of retired households was 7.3% (£1,400) higher in 2013/14 than in 2007/08, after accounting for inflation and household composition, compared with 5.5% (£1,600) lower for non-retired households.

Overall median disposable income in 2013/14 was £24,500 – higher than in 2012/13, after accounting for inflation and household composition, but still below the level seen in 2007/08.

http://www.ons.gov.uk/ons/rel/household ... 13-14.html

[Little John]

They may have paid a broadly similar proportion of their total income as tax. But, that disguises the fact that poorer earners pay a vastly larger proportion of their income that is required for the necessities of life.

In other words, let's assume, for argument's sake, that the minimum income a person needs to pay their way in life is x. Then take two people; one who has a gross income of 2x and another who has a gross income of 5x. If they both pay, say, 50% of their incomes as tax, this means that the person who earns 2x is barely left with enough to survive. Whereas, the person earning 5x is still left with 2.5 times the minimum amount needed to survive.

Of course, in the real world, it's far worse than that. In the real world, there are huge swathes of low earners who are simply unable to generate an income after tax, even after putting in 40 plus hours per week, to pay their basic way in the world. Hence the need for various state benefits to top their incomes up. Furthermore, it's about to get whole lot worse for them with the upcoming swinging cuts to family tax credits. This is, for the most part, the working poor we are talking about here.

[clv101]

The median disposable income of retired households was 7.3% (£1,400) higher in 2013/14 than in 2007/08, after accounting for inflation and household composition, compared with 5.5% (£1,600) lower for non-retired households.

I thought this government was all about 'working people'?

The retired represent the largest block of non-working people in the land. Why are their incomes increasing faster than others?

[Little John]

The median disposable income of retired households was 7.3% (£1,400) higher in 2013/14 than in 2007/08, after accounting for inflation and household composition, compared with 5.5% (£1,600) lower for non-retired households.

I thought this government was all about 'working people'?

The retired represent the largest block of non-working people in the land. Why are their incomes increasing faster than others?

Because the retired belong to a (baby boomer) generation that is:

a) more likely to vote

b) more likely to vote Tory

[3rdRock]

Little John's right. The inequalities between the rich and poor in this great nation of ours are becoming more than obvious. Still, we're all in it together, aren't we?

The report found that the richest fifth of the population pay three percentage points less of their income in tax than the poorest fifth. The gap has grown since last year when the difference was 2.3 points.

Before taxes and benefits the richest fifth of households was found to have an average income of £80,800 in 2013/14, 15 times greater than the poorest fifth, who had an average of £5,500.

[3rdRock]

The median disposable income of retired households was 7.3% (£1,400) higher in 2013/14 than in 2007/08, after accounting for inflation and household composition, compared with 5.5% (£1,600) lower for non-retired households.

I thought this government was all about 'working people'?

The retired represent the largest block of non-working people in the land. Why are their incomes increasing faster than others?

Because the retired belong to a (baby boomer) generation that is:

a) more likely to vote

b) more likely to vote Tory

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