Monday, October 01, 2012

Misleading percentages again this time for Income

Following the LibDem conference and the call for "fairer taxes" the Conservatives and the wealthy have tried to fight back the quote I'm seeing bandied about is how 'the higher earners have 10% [or 13% depending on the source] of the income, but pay 28% of the tax' and how this isn't fair. On the face of it this seems right how could anyone argue that they're paying more than others already?

To put this in perspective though requires a different prefix to the sentence. Instead of "higher earners" I'll return it to the original "1% of tax-payers". While we still have the latter part the former would now read "1% of tax-payers earn 10% of the income". Why the change? Well the quoters want to highlight how unfair it is that 10% of income attracts 28% of tax; and that's a little difficult to do if you start by pointing out that said income goes only to 1% of the earners.

It gets even better if anyone decided to check out the report from the excellent FactCheck regarding total tax as a percentage of total income. Add in NI and VAT etc. and it seems everyone is paying around the 30% mark just mixed up in different ways.

So wouldn't that make this a call to keep things as they are? If everyone is paying the same amount of tax total that seems to be fair. No need to raise the tax levels for the rich or lower them for the poor. Well that's why in the case the quoters love percentages, start talking in absolute terms and suddenly the disparity shows up.

Take someone earning £200 a week (minimum wage) who pays a total of 30% tax in different ways; that leaves them with £140 a week. Switch to a high earner of £1,000 (£50k a year) and they'd be left with £700. Think about that in terms of purchasing power - someone earning £200 losing £60 might mean not being able to purchase clothes, food etc. Someone earning £1,000 losing £300 means foregoing the gold-plated taps in their new kitchen.