The effects of taxes and benefits on household income
AbstractSummary of results for all householdsThe overall impact of taxes and benefits are that they lead to income being shared more equally between households. In 2009/10, before taxes and benefits, the richest fifth (those in the top income quintile group) had an average original income of �77,900 per year, compared with �4,800 for the poorest fifth ‐ a ratio of 16 to 1. In 2008/09 the corresponding ratio was 17 to 1, indicating that inequality of original income fell slightly between the two years. Original income includes earnings, occupational pensions and investments.In contrast to original income, the amount received from cash benefits tends to be higher for poorer households than for richer households. The largest cash benefits were received by households in the second quintile group, �8,300 per year, compared with �6,900 for households in the bottom group. This is largely because more retired households are located in the second quintile group, compared with the bottom group, and in this analysis the state pension is classified as a cash benefit. After cash benefits were taken into account, the richest fifth had income that was seven times that of the poorest fifth (gross incomes of �79,900 per year compared with �11,700, respectively), a proportion that was unchanged on the previous year. Cash benefits therefore reduced the inequality of income.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Economic & Labour Market Review.
Volume (Year): 5 (2011)
Issue (Month): 6 (June)
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Web page: http://www.palgrave-journals.com/
Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
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