The revelation that higher incomes have been under-reported in official data has led to predictable calls for higher taxes. Oliver Kamm in The Times, for example, thinks that the 45% top rate of income tax could be pushed up further, perhaps to Swedish levels.

It is worth remembering that top earners face a 2% employee National Insurance Contribution on top of income tax, giving them a marginal tax rate of 47% (or 48% in Scotland). More importantly, as the IFS has repeatedly pointed out, people in certain income categories can face much higher marginal rates. For example, someone whose earnings go up from, say, £100,000 to £110,000 has their tax-free personal allowance reduced by £1 for every £2, meaning they face an effective marginal tax rate of 60%. Other steep marginal rates occur when various benefits are withdrawn, or when tax-privileged pension saving starts to be reduced at higher income levels. Many people already feel highly taxed, Mr Kamm.

But the impact of one form of taxation is rarely discussed in this context. This is employer National Insurance Contributions. This is thought of as something businesses pay rather than individuals. But this isn’t so. The fact that the employer transfers money over to HMRC means little. Just as the incidence of VAT falls largely on the consumer in the form of higher prices, and corporation tax falls on employees in the form of lower pay and, again, consumers in higher prices, so the burden of employer NICs also falls on workers.

Think of it like this. What makes you employable is the value you add to a business’s revenue. Suppose your output (‘marginal revenue product’ in economic jargon) is worth £30,000 to the employer. This is the maximum he or she is willing to pay for your services. But employer NICs are currently 13.8% of gross pay above something called the Secondary Threshold. This means the most he or she can offer you in gross pay is £27,400 – on which the employer will pay approximately £2,600.

It is clear, when you think about it like this, that an increase in employer NICs reduces what the employer can pay you. So it’s effectively a tax on your income. It doesn’t matter whether we have an increase in employer NICs or in employee NICs or in income tax – you end up paying anyway.

It would be much more honest if we scrapped NICs completely and just had income tax – but this would of course make it clear that we are taxed much more heavily than our big-spending politicians and commentators like Mr Kamm like to admit.

This point is rammed home even more strongly when we consider that any regulatory obligations placed on employers – such as pension auto-enrolment, longer holidays, parental leave – all are a cost to the employer and ultimately reduce the amount they can profitably pay in wages. The rapid growth in these obligations in the last twenty years, coupled with lower productivity growth (itself arguably partly the result of greater regulation) goes a long way to explaining why pay has not increased as rapidly as might be hoped.