Sunday, July 28, 2019

The rich get richer


The “unearned income” of the most well-off people in Britain more than doubled while millions endured austerity and stagnant wages, an Observer analysis of government data reveals.

Income from property, interest, dividends and other investment income – sometimes called unearned income, as most of it does not come directly from work – rose by more than 40% between 2010-11 and 2015-16, the most recent year for which HMRC figures are available.

However, the gains were massively concentrated among the top 10% of Britons, whose unearned income doubled from an average of £19,000 each to more than £38,000 – well above the average household income of around £25,000 in 2015-16.
The data only counts individual UK taxpayers, and excludes those who did not receive any investment income – between a quarter and a third of the population, meaning the highest gains are even more concentrated at the top. Meanwhile, average weekly earnings from paid employment fell in real terms between 2010 and 2016, so most people’s jobs were not paying enough to keep up with the cost of living. Benefit cuts worsened the impact on the poorest.

More than 90% of unearned income is skewed towards just 6-7% of the population. The HMRC figures show that more than a quarter of people had no unearned income in 2015-16, and those who did made £28 on average – compared with nearly £40,000 among those in the top 10%. The rapid growth in unearned income of the richest was driven by a post-crisis boom in dividend payouts. 

Dividends are taxed at a lower rate than normal income. An income of £38,000 made through paid work incurs nearly £9,000 of tax at present, whereas the same income made up of dividends attracts tax of less than £2,000. As a result, some small business owner-managers pay themselves dividends, rather than a salary, to cut their tax bill. Dividends, interest and property rent are all ways of making wealth profitable. HMRC analysis suggests around 100 people withdrew dividends averaging £30m each from their companies shortly before dividend tax rates rose for higher earners in 2016. Despite this rise, dividends are still taxed more lightly than job salaries.

Separate HMRC data shows that the average investment income of the highest-earning 10% of trusts nearly doubled between 2010-11 and 2015-16, from £108,000 to almost £200,000 – again boosted by rising dividends.

Liam Kennedy, research officer at the thinktank Class, said: “These figures go to show how our economy rewards those with wealth and not those who work. The UK suffers from extreme levels of wealth inequality..."


Average unearned income among richest 10% of Britons in 2015-16
£38,000

Average household income 2015-16
£25,000

Rise in company dividends 
60%
CAPITALISM BENEFITS THE CAPITALISTS

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