What effect do taxes and benefits have?
4. What effect do taxes and benefits have? (What the government does/plans)
Taxes and benefits make a huge difference to relative poverty and inequality. There is a very good official article, updated each year, on 'The effect of taxes and benefits on household income.' The latest edition shows that, in 2009/10:
- For the poorest fifth of the population, cash benefits are worth £6,883,
- 59 per cent of their gross income;
- For the richest fifth, they are worth £1,992,
- 2.5 per cent of their gross income;
- The poorest fifth pay £4,160 in direct and indirect taxes;
- The richest fifth pay £26,941;
- In addition, public services and other 'benefits in kind' are worth £7,555 to the poorest fifth,
- 50 per cent of their final income;
- They are worth £5,123 to the richest fifth,
- 9 per cent of their final income.
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