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How much tax do the rich really pay? Evidence from the UK

Advani, Arun, Hughson, Helen ORCID: 0000-0001-7873-4141 and Summers, Andy (2023) How much tax do the rich really pay? Evidence from the UK. Oxford Review of Economic Policy, 39 (3). pp. 406-437. ISSN 0266-903X

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Identification Number: 10.1093/oxrep/grad032

Abstract

Using anonymized administrative data on the population of UK taxpayers, we show that—in line with high-profile anecdotes about the tax affairs of the rich—effective average tax rates (EATRs) decline at the top of the distribution of income and capital gains. We also document substantial variation in EATRs within remuneration level: a quarter of those in the top 1 per cent pay headline rates, while another quarter pay at least 9pp less than the headline rate. Most of this effect is driven by the composition of remuneration, with investment income having lower tax rates and capital gains having lower rates still. If all individuals with income above £100,000 paid the headline rates, this would raise tax revenue on income and gains by £23 billion on a static basis, an increase of 27 per cent in the tax paid by this group.

Item Type: Article
Additional Information: © 2023 The Author(s)
Divisions: Law
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
Date Deposited: 03 Oct 2023 14:12
Last Modified: 15 Jul 2024 00:54
URI: http://eprints.lse.ac.uk/id/eprint/120356

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