Thread by @ChrisGiles_

⚠️ Warning: nuanced argument/thread utterly unsuitable for Twitter on the rich, taxes and visualising data ⚠️

This graph from Warwick/London School of Economics suggests the rich pay lower tax rates than "normal" people and the gap widens for the filthy rich

1/

My nuanced argument is:
- The chart and paper seeks to misinform you about the rich and taxes (they should desist)
- The authors' underlying concern about elements of the UK tax system is legitimate

FT write up:
ft.com/content/09f373…

Paper:
warwick.ac.uk/fac/soc/econom…

2/

Go back to the chart showing average tax rates at different levels of income over £100,000 (blue line)

1) Only shows people with incomes over £100,000
- in 2016 there were 31,200,000 income tax payers
- 858,000 are represented here
- 30,342,000 are ignored

3/

But - it's worse than that.

Notice those long straight lines?

Each represents 1,000 people

So we have the whole chart dominated not by the 1%

but by the 0.05%

It's a gross distortion of reality - suggesting the extremely rare is common

4/

If you want to know about the progressivity of the income tax system. Go to HMRC data for same year where this has been done comprehensively

assets.publishing.service.gov.uk/government/upl…

5/

One of the main reasons the effective tax rate on income is lower is income tax relief on pension contributions.

There has been a long debate about this in the UK, but when saying there's easy money to be had, the authors don't mention they've abolished higher rate relief

6/

Go back to the main chart - the red line is all about capital gains and not income.

Trouble is that it is presented here as if everyone gets capital gains every year- even the 400 people with 9-11m

Not true

7/

There are some areas of carried interest where it is disguised remuneration. In many other instances, it isn't

If you sell BP shares and buy Unilever, realising a taxable capital gain, is that the same as annual earnings?
If you sell a business after 40 years, is it still?

8/

These are rather difficult conceptual issues about the definition of income, the appropriate basis for taxation and how to measure it on an annual basis

- should it be measured/taxed on turnover or when it accrues, for example?

9/

For all my misgivings about the analyitical presentation, the authors conclusions are reasonable

- we should look at our choices in how we tax different sources of income

- Don't pretend the answers are easy or there is a huge pot of cash just waiting to be plucked though

ENDS

If you want to see the thread from the authors themselves, here is a link - I should have posted this earlier in the thread - sorry

https://twitter.com/Summers_AD/status/1272429275317260289