Divided We Stand: Why Inequality Keeps Rising

So just why is David Cameron so keen to cut the money paid in benefits to the disabled by 20% ?  Well it allows him to cut the top rate of income tax from 50% to 45% which is good for himself and all his friends who can afford to pay £250,000 for for dinner and never mind the fact that income inequality has already made the rich richer

A report from the OECD Directorate for Employment, Labour and Social Affairs (UK notes) states:

Income inequality among working-age persons has risen faster in the United Kingdom than in any other OECD country since 1975. From a peak in 2000 and subsequent fall, it has been rising again since 2005 and is nowwell above the OECD average.

The annual average income of the top 10% in 2008 was almost GBP 55,000, almost 12 times higher than that of the bottom 10%, who had an average income of GBP 4,700. This is up from a ratio of 8 to 1 in 1985. Taxes and benefits reduce inequality by a quarter in the United Kingdom, in line with the OECD average.

Amongst the key findings:

Top income shares doubled. The share of the top 1% of income earners increased from 7.1% in 1970 to 14.3% in 2005 [Table9.1]. Just prior to the global recession, the top 0.1% of top earners accounted for some 5% of total pre-tax income. At the same time, the top marginal income tax rate saw a marked decline: dropping from 60% in the 1980s to 40% in the 2000s, before its recent increase to 50%.
Benefits became less redistributive despite being more targeted towards the poor. This was largely driven by declining benefit amounts. It was also due to more people working, often at low-wage jobs and so not qualifying for benefits. And lastly due to tighter eligibility conditions.

Far from having the top rate of tax cut the report says that:

The growing share of income going to top earners means that this group now has a greater capacity to pay taxes. In this context governments may re-examine the redistributive role of taxation to ensure that wealthier individuals contribute their fair share of the tax burden.

You can read the full report here http://www.oecd.org/document/51/0,3746,en_2649_33933_49147827_1_1_1_1,00.html

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