Tuesday 11 August 2009

Handy tables comparing distribution of incomes and property wealth

I'd take the absolute figures with a pinch of salt, but in relative terms, having cross referenced them with various other sources, they seem 'about right':

Taken from this fine article over at the ALTER website.Say what you like about the 'social justice' point, but the difference in the distributions are quite startling.

NB, income inequalities don't bother me much, firstly because that appears to be the natural order of things and secondly because lower income people get much better value for money, with the exception of housing costs, of course.

12 comments:

Reactionary Oik said...

Thanks Mark that is very interesting.

What will be UKIPs policy regarding LVT?

Because of this and the names at the side of this document I admit to being swayed toward the Lib Dems.

That is troubling because I would rather not vote for just another bunch of Cultural Marxists wearing a different coloured rosette.

Mark Wadsworth said...

NH, funnily enough UKIP and Lib Dems both say that the income tax personal allowance should be increased to £10,000.

RO, remember that ALTER are only a minority within the Lib Dems; party policy still appears to be to replace Council Tax with Local Income Tax (a step in the wrong direction!). And the whole bansturbation, global warmening and EU-philia is more than enough to put me off joining the Lib Dems.

PS, there are a number of LVT-ers in UKIP as well, although no official policy one way or other as yet.

James Higham said...

Poorest isn't £100 as the graph shows but £60 odd.

Pogo said...

It would be interesting to see how the two sets of figures correlate, for example, what is the income breakdown of the top slice of the "property wealth" table?

In my case, because I'm relatively ancient, I fall comfortably into the top 5% of the "property wealth" group but barely make the median of the "income" group. (Which is probably why I'm not that keen on the idea of LVT) :-)

Anonymous said...

How would LVT work wirh council tenants?

Mark Wadsworth said...

JH, like I said, the absolute figures are open to dispute; but the overall picture is accurate.

Pogo, sure, which is why I'd scrap Inheritance Tax as well to even things out.

Anon, council tenants would just pay one all-inclusive figure for rent plus LVT - rent is rent, and LVT is ground rent, so it's the same thing, really.

What is the point into splitting it up, and then having two parallel systems for Housing and Council Tax benefit?

JuliaM said...

"What is the point into splitting it up, and then having two parallel systems for Housing and Council Tax benefit?"

Double the state employees to administer the two systems, of course! :)

Mark Wadsworth said...

JuliaM: "Double the state employees to administer the two systems, of course!"

Nope. It quadruples it actually; one to collect/chase the rent; one to collect/chase the council tax; on to administer Housing Benefit; and one to administer Council Tax Benefit.

David Cooper, Libdem ALTER said...

Dear Pego,

I think your objection to LVT is that it would disadvantage the "relatively old" i.e. pensioners who are on fixed income and who would be unable to cope with tax liabilities which fluctuated with property values. The solution to this is to allow those above retirement age to defer LVT + interest until they sell their property at which point it becomes a charge on their property.

Nobody likes taxes, but at least be LVT is economically efficient.

Ed said...

David, politically that may be a good idea, but economically it is bad. Given that retirement could easily be 30+ years and the rising percentage of pensioners in the population as a whole, the deferment of LVT until the property is sold creates risks if property prices fall (which is what we should always want IMHO). Better that tax is paid as we go along, not stored up on the assumption of future asset prices. Also, some clever accountant or tax lawyer will figure out a way to avoid actually selling the property, and thus avoid (indefinitely defer may be a better term) a huge accumulated tax bill.

The solution for the income poor, asset rich (such as the pensioners in question) is to realise that it is a dumb idea to be income poor and asset rich.

Mark Wadsworth said...

Ed, the risk is minimal...

Average age from retirement age to dying in the UK is about 20 years, so the tax would have to be very high indeed for there to be a risk that the accumulated bill at death is higher than the value of the property, and if in isolated cases it is, well so what?

I AM a clever accountant or tax lawyer, and I have worked out how to prevent such anti-avoidance happening.

Ed said...

Hi Mark,

is about 20 years

At the moment. We are not putting up the retirement age fast enough. As for the risk, are we implicitly assuming here that the pensioner upon death will own 100% of their property? What if there is a outstanding mortgage debt? (see below).

well so what?

The what in these cases are that, all other things being equal, other people will be overtaxed to make up for these losses.

More generally, I am opposed to this exemption from the normal rules because it continues the misguided notion that one can pay one's bills "for free" from the (I admit, probably still rising) value of an unproductive asset, rather than encouraging people to either generate income themselves or invest in others doing so.

My compromise would be:
* the deferment for pensioners should be optional and opt-in, rather than automatically applied, because
* anyone who signs up for this loses the right to vote, stand for election or be a member of a political party. Perhaps even be a director of a company or charity. No representation without taxation!
* the outstanding tax would have first claim on all assets in the estate, replacing all prior claims to be head of the queue. Naturally, the mortgage company may not like this - they can call in the loan if they wish.

how to prevent such anti-avoidance happening

I don't think you meant to have the anti- there, or was it a Freudian slip? :-)