Recent years have seen increased interest in the share of income that accrues to the richest in society and how much tax they pay. We will be providing new evidence on the scale and sources of income for those at the top of the distribution and setting out how tax policy can address top income inequality.
Business and capital incomes – increasingly important at the top
Income from business ownership accounts for a large, and, in some countries, growing share of top incomes. In general, capital gains and dividend income are more lightly taxed than employment income. These policy choices are central to our ability to redistribute from rich to poor, and are arguably unfair when similar people earning the same overall income pay very different tax bills depending on the source of their income. We will provide new evidence on the importance of business income at the top of the UK income distribution.
Good tax design requires understanding context and unintended consequences
Taxation crucially affects the incentives that people face and choices they make. Higher taxes can, for example, lead people to work less, move abroad, or shelter their money in an offshore account. It is important to take all these responses into account when designing tax policies to tackle income inequality. We will draw on the best available evidence on how people respond to taxes and on the incidence of different taxes (i.e. who ultimately bears the burden of a tax) in setting out tax policy options.