Most people in the UK wrongly assume that the richer you are, the more tax you pay. A new study has helped to break down that myth and reveals that in actual fact, the truth is just the opposite.

The less you earn, the greater proportion of your income in tax you pay. Sounds fair right? Right?

A new study commissioned by the Equality Trust revealed that the poorest 10 per cent of households pay eight percentage points more of their income in all taxes than the richest 43 per cent.

This is directly at odds with the perception that many men and women have of the tax system.

You see, the study showed that most people assume, unsurprisingly, that the wealthier you are, the more you contribute to the economy.

The study, which was carried out by Ipsos Mori found that nearly seven in ten people believe that households in the highest 10 per cent income group pay more of their income in tax than those in the lowest 10 per cent.

The research showed that not a single person in the poll knew how much the richest and poorest paid in tax. On average, the public underestimates what the poorest 10 per cent pays in tax by 19 percentage points, believing they pay just 24 per cent of their income in taxes.

Those who earn the least in society pay 43 per cent of their income in tax, while the average
household and those in the top 10 per cent both pay 35 per cent of their income in taxes.

At the same time, the vast majority (96 per cent) believed that the tax system should be much fairer and more progressive.

Well it isn’t.

The analysis showed that the higher percentage paid by the poor is attributable to a number of taxes.

While income tax and national insurance are broadly progressive, the poorest households pay roughly 23 per cent of their gross household income in indirect taxes on consumption and more than four times as much of their income in council tax as the top earners.

In otherwords, the tax system is not fit for purpose.

Commenting on the revelations, Duncan Exley, director of the Equality Trust, said: “The public are misled about this country’s tax system. They think households with the highest incomes pay more than those with the lowest, whereas the opposite is the case. Even more concerning is how little our current system matches people’s preferences on tax. There is clearly strong support for a system that places far less burden on low-income households.”

The research also showed that despite the fact that the economy – for now at least – is growing more robust, the benefits are really only being felt by big corporations and the super wealthy.

Over the past year alone, the richest 100 people in the UK have seen their wealth increase by a staggering £40.1 billion to a total of £297.133 billion. This is equivalent to over £100 billion more than the wealth of the poorest 30 per cent of the UK population.

The study also showed that the tax system was at its most regressive in 2001, when
the bottom 10 per cent of households paid 55 per cent of their total income in all taxes, while the middle paid 36 per cent and the top 10 per cent paid 34 per cent of their earnings in tax.

The “trickle-down effect” has simply failed to manifest.

Even Warren Buffett, one of the richest men in the world emphasised this point very frankly, when he told an American audience: “If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further… The rich are always going to say that, you know, just give us more money and we’ll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on.”

It seems, the British public are slow at ‘catching on’ as well.

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