Income
- Created by: Sophie Masetti
- Created on: 29-03-15 14:31
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- Income
- Explanations for increases in income inequality
- Dramatic rise in the income of the very richest
- The number of UK citizens with annual incomes exceeding £1 million increased by 800% between 1996 and 2006.
- Government policy
- 1979-1997: Conservative government (M. Thatcher) The rich became richer- increase in regressive tax (VAT).
- 2010 onwards: Conservative/ liberal. Top rate tax decreased to 45% in 2013. Cuts in benefits and tax credits- gap between rich and poor increased.
- Dramatic rise in the income of the very richest
- Redistribution of income
- Redistribution in the UK is based on a mixture of taxes and benefits...
- Direct taxes: Straight out of a persons wages and include things such as income tax and national insurance.
- Indirect taxes: E.g. VAT which is added to purchases and also duty on petrol, alcohol, and cigarettes (regressive taxation)
- Cash benefits: Payments paid by the gov to lower earners and unemployed- e.g. job seekers allowance and income support.
- Benefits in kind: Services provided by the state e.g. education and health.
- Redistribution in the UK is based on a mixture of taxes and benefits...
- Difficulties of measuring income
- Those with large amounts of income will seek to minimise their levels of income on their income tax returns
- People try to hide how much they really have
- Should income be measured before or after tax?
- Should income be calculated by household or the individual?
- What about those who work for 'cash in the hand'?
- What about benefits in king- should they be included?
- Those with large amounts of income will seek to minimise their levels of income on their income tax returns
- Does redistribution work?
- According to 2010/11 office of national statistics data:
- Incomes before tax: Richest 20% earn 16 times more than the poorest 20%.
- After income tax and addition of various benefits- this goes down 4 times more/
- VAT has the greatest proportional impact on poorer families- there is still considerable inequality despite tax.
- Incomes before tax: Richest 20% earn 16 times more than the poorest 20%.
- According to 2010/11 office of national statistics data:
- Explanations for increases in income inequality
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