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Inequalities Seminar: The Missing Billions: Measuring Top Incomes in the UK

5 February 2019

Speaker: Dr Andrew Summers (Department of Law, LSE)

The tax data currently used to measure top incomes in the UK only include sources that are subject to Income Tax. Sources taxed on any other basis (or not at all) disappear from statistics on income inequality: for example, much of the income arising to non-domiciled residents, all capital gains whether realised or not, and tax-exempt returns on savings and investments. I map these and other missing sources and provide evidence that they are quantitatively important for the estimation of top income shares. The effect is large because the scope of taxable income in the UK is unusually narrow, and subject to exemptions that disproportionately favour the richest; so far, no attempt has been made to correct for this in national statistics. The missing sources that I identify cast doubt on the prevailing narrative that UK income inequality has stabilised or fallen since the last financial crisis. I provide initial indications that once these sources are added, the top one percent share may be seen to have risen since 2008 and could be much closer to US levels than conventionally thought.

Presentation Slides here 

Listen to podcast here

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Inequalities Seminar: The Missing Billions: Measuring Top Incomes in the UK Inequalities Seminar: The Missing Billions: Measuring Top Incomes in the UK