Income

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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.
    • 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.
    • 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?
    • 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.

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