RAPID RESPONSES

A taxing dilemma

[Re: Why Britain’s income tax is already astonishingly progressive, yesterday]
Anthony J Evans is wrong on several counts.

Progressive taxation is not where the richest pay a greater percentage of the total tax bill, but where they pay proportionately more compared to their income. The top 1 per cent of taxpayers take some 12.6 per cent of the total income of taxpayers, so even a neutral tax system would see them paying 45 per cent of the total tax liability. Secondly, the statistics only cover income tax. National insurance contributions (NICs) now amount to about three-fifths of the total collected in income tax. Since NICs for employers are at a flat rate over the earnings threshold, and that for employees is a regressive charge, dropping from 12.8 per cent to 2 per cent, this will reduce the progressivity of the overall liability, for the top 1 per cent particularly. Finally, Evans refers to “earners”. His statistics relate to taxpayers, and include pensioners.

Mike Truman, editor of Taxation

Anthony J Evans responds:
Income tax is progressive since higher earners pay tax at a higher rate. Progressivity is often advocated on the grounds that that the richest should pay more than the poorest, and it was this issue I attempted to analyse. You acknowledge that the article was about income tax, so it seems odd that you suggest I've tried to hide this fact. Finally, did I say "current" earners? Is that just a semantic quibble?

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