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Tuesday, 29 September 2009

Middle classes and tax

I like this, so i'll post it at length:

summary: the middle classes benefit from tax, i.e. their income goes UP after tax and benefits inc education, healthcare

Question 1.

What is the income of the middle fifth of British households, before tax and benefits?

Question 2:

What is the income of the middle fifth of British households after tax and benefits? (excluding things like market value of education, healthcare, etc etc).

Question 3:

How much more does the average middle British household pay into the tax pot than they take out in benefits and so on?

Question 4.

As a proportion of household income, have taxes (direct and indirect) on middle income households increased or decreased between 1996/7 and 2006/7?

Question 5

What proportion of the middle fifth of British households rent their home?


(all data from National Statistics, unless otherwise stated)

1. The pretax income of a “middle Britain” household (here defined as the middle fifth of British households by income) is £23,640. This is £4,000 less than had as the average Graduate starting salary two years ago, according to the right wing think tank Reform

2. After taxes and benefits, this figure is £19,270.

3. Trick question! Sorry.

If you take the above figure try and ascribe a value to the benefit of free healthcare and education (which you get in return for paying taxes) the income of middle Britain INCREASES, to £25,147 pounds.

Middle Britain gets more out of the Tax system than it puts in. The difference is paid for by the top quintile. The net effect of the tax and benefits system is to give money to middle Britain, not take it away. By one and a half thousand pounds.

4. In 1996/7 direct taxes on middle income households as a proportion of income were 17.6%. Indirect taxes were 18.9% for a grand total of 36.5% of total income.

In 2006/7 the figures were 18.5% Direct, 16.3% indirect – giving a grand total of 34.8%. So the tax take as a proportion of income for Middle Britain has fallen by 1.7%.

Why? Some of this is because middle Britain now smokes less, but 1% of it is because less VAT is now paid – presumably relating to the reduction of VAT on Fuel and Sanitary towels (this latter is a bigger deal than most people think)

5. 29% of non- retired households in the middle fifth of household rent their home. (18% own their home outright, 52% have a mortgage.) For retired middle income households the figure is 45%.

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