The regressive evolution of the UK tax base

In a recent SPERI paper, Jeremy Green and Scott Lavery argued that the economic recovery has been secured through processes of ‘regressive redistribution’, as quantitative easing and the suppression of wages represent a striking redistribution of wealth to asset holders and businesses, and away from low and median earners. This post presents evidence on a further dimension to the regressive response to financial crisis and recession, that is, the transformation of the UK tax base.

Our SPERI British Political Economy Brief, ‘The Evolution of the UK Tax Base’, published today, demonstrates that in the period since the financial crash, regressive forms of taxation have come to constitute a growing share in the overall tax base, as regressive taxation is deemed pivotal to delivering deficit reduction. In contrast, however, progressive taxation and business taxes have been relaxed – demonstrating the nature of the coalition government’s understanding of how economic recovery can be achieved.

In short, the evolution of the UK tax base since the financial crisis shows that ‘trickle down economics’ is alive and well, as policy-makers seek to unleash the wealth-creating potential of already affluent groups. The perceived need to reduce the budget deficit, in the name of austerity, is left to regressive taxes such as VAT (in addition to public spending cuts), which are disproportionately paid by the poorest members of society.

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