This is Ritchie ranting about inequality:

That’s why the top 1% of income earners in the UK have the lowest overall tax rates in the UK.

Like Eoin, Ritchie doesn't give a source. And that's most likely because it's untrue.

When talking about overall tax rates, people normally mean income taxes as a proportion of total income. On this basis, we can refer to my earlier blog post on this subject, in which we produced the following table. The figures are derived from an ONS publication. The ONS doesn't produce figures for the income earned by the top percentile of earners, but we do know that they pay a phenomenal amount of income tax - 27.7% of all income tax paid by taxpayers in this country.

So, on the traditional basis, the richest 10% pay direct taxes at a rate of 25.3% and the poorest 10% pay direct taxes at a rate of 12.0%, under half that of the richest. The rate paid by the richest 10% is higher than all other deciles, making Ritchie's claim demonstrably false on under the traditional view of tax rates.

Looking at overall taxes paid (including indirect taxes such as VAT, beer/wine/spirits duties, gambling taxes, tobacco taxes and the like), the poorest 10% pays taxes of all kinds at a rate of 43.3% compared to the richest decile's 33.6%. While it may be these numbers that Ritchie is basing his case on, it's a weak argument. This is because so much of the income earned by the poorest 40% derives from the benefits system rather than earned income. When we factor in benefits, the effective overall tax rate paid by the poor is negative, meaning that they're net recipients of other taxpayers' money rather than net payers of tax themselves.

It's right to look at the tax and benefits system in the main like this because accountants need to look at the substance of a transaction rather than its strict legal form. The substance of this particular transaction is that rich members of society help poorer members of society through the redistributive actions of the tax system. Only pedants and lawyers would disagree.

There's an argument to be had as to whether it's desirable to tax the very poorest members of society and then give it back to them in benefits. But it's an unavoidable truth that the tax and benefits system does indeed redistribute money from the rich to the poor, making it a grotesque distortion to claim that the very rich pay a lower overall rate of tax than the poor. They don't. 

People who read this post also read:

• The curious poverty of thought on the left over the 50p income tax rate
• The flip side of progressiveness
• Pasty tax vs corporation tax
• This FairTax idea won’t work
• That David Cameron family tax haven non-story in full

Filed under: Politics, Taxation with tags hmrc, idiots, income tax, lies, office for national statistics, redistribution, richard murphy