Measuring more
Posted by Christie Malry on February 19, 2011 at 2:08 pm
Accountants are really good at measuring things. And we love doing it. It can be fun, too. Why not have a go yourself:
Which of the following shoemakers makes more shoes? Mr Apple, who makes 10 in 100 hours, or Mr Banana, who makes 180 in 2,000 hours?
Well, I hope we can all agree that, while Mr Apple might have worked more quickly, Mr Banana actually produced more shoes.
What about this one? Alfie plays one game of football and scores one goal. Bertram plays 200 games of football and scores 180 goals. So who scores more goals?
Again, not trying to trick you here. Bertram, by virtue of his greater number of games, scores more, even though Alfie has a better average. It would be more than just a little deceptive to claim that Alfie scored more, just as it would be very misleading to claim Mr Apple had produced more shoes.
So, here's another. Mr Ash pays £1,000 tax on his salary of £10,000. Mr Birch pays £18,000 tax on his salary of £200,000. Who pays more tax?
Our friends at UKuncut like to claim that Mr Ash pays more tax. But we have just demonstrated that this isn't a reasonable representation of the situation. In fact, it's a filthy lie. Bashing Mr Birch, who pays 18 times the tax of his lower paid comrade, for paying "less" tax is tantamount to fraud.
If you are ever tempted to make similar claims about tax, think about Mr Banana and Bertram. They prove that it's bananas to claim that the poor pay more tax.
If, after reading all this, you still want to argue the toss about it, please feel free to comment below.
Written on my Android mobile phone. Article may be edited later.
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I think that using the real numbers makes your point quite nicely. I've had a go using http://listentotaxman.com/index.php :-
Mr Ash would make HMRC £1,724 in tax and NI + emp NI on his £10k wage. Mr Birch would make HMRC £108,147 for his £200,000 pay. (Including emp NI in the gross numbers reflects the total tax burden on their wages). A 17% gross tax take versus a 54% gross tax take. So Mr Birch's tax contribution to the state is 62.7 times larger than Mr Ash's and this contribution is 3.14 times larger relative to his gross income. The rich pay more taxes on an absolute basis and as a proportion of their gross income.
Now I'm not saying that Mr. Birch is 62.7 times more usefull to society than Mr Ash and I do not believe that paying more or less taxes makes you proportionately more or less of a moral person but it is absurd for UKUncut to use these sorts of arguments or to describe the tax system as being unfair to the poor given the basic facts of our highly progressive tax system.
It isn't the absolute amount of tax that is relevant to its impact on Messrs Ash and Birch; it isn't even the differing proportions of their income that are taken away by tax. What is important is how large a the proportion of their personal variable costs - their discretionary spend - which is taken away. So, using Eyeswater's figures and assuming fixed costs of £7k for each, Ash is losing 57.4% from his discretionary fund and Birch is losing 56%. OK, I picked by £7k figure to suite my argument, but the principle stands.
Now, you might want to argue that this disproportionate effect on Ash is fine: Birch is more productive. The moral argument here is that Birches hard work should be rewarded. And if Mr Ash and Mr Birch had equal abilities, equal access to capital and only made clearly comparable products this argument _might_ have some merit. But of course those are big assumptions to make.