This is an interesting pair of numbers:
In 2008/09, gross income tax receipts were £152.5 billion. In the same year, social security benefits cost the Exchequer £150.1 billion.
In 2009/10, the Treasury is expecting to take in £140.5 billion in gross income tax receipts. Social security benefits are projected to be £164.7 billion.
Or pair of pair of numbers if you prefer.
Income tax is the only one of the major revenue raisers which is progressive: VAT certainly isn\’t, excise duties aren\’t, inheritance tax raises, at this level of counting, nothing more than a rounding error.
Pretty much the rest of the tax system is regressive, not progressive. So the welfare system, that part of the spending system which is supposed to be progressive is actually being funded, in part, by regressive taxes.
That\’s something of a problem I would have thought for those arguing in favour of more redistribution. We already seem to have reached the limit of what we can do through the tax and benefit system.
Raising income tax on the rich isn\’t going to help: various reports on the new 50% rate show that we\’re around and about the Laffer Curve inflection point. Higher taxes won\’t raise much if any new revenue.
And increasing indirect, regressive, taxation doesn\’t seem to be the way to redistribute more. Taxing the poor more heavily to give to the poor just ain\’t equality producing redistribution.
So, as I say, we seem to have reached the bounds of what is possible in the tax and spend redistribution plan.
Unless, say, we were to cut huge swathes out of the other spending, so as to make redistributive spending come from that one progressive tax, the income tax.
Bit of a bind for the big state redistributionists, no?