Numpty\’s at it again

Our Eoin:

The graph above shows, in the last ten years, the amount of Corporation Tax paid by the profiteer as a proportion of the amount of tax paid by the worker.  On this occasion I exclude VAT & NICs as both profiteer and worker pay them. Is it right that the worker pays more than three times in income tax the amount that a profiteer pays in corporation tax? For every £1 you pay on income tax, a profiteer will pay 30 pence in profit tax.

Err, yes, this is right and proper actually.

1) Taxation of returns to capital should be lower than taxation of the returns to labour. For there is less deadweight cost associated with the taxation of returns to labour than there is with the returns to capital. No, really, go and look it up.

2) You\’ve measured only Corporation Tax: but these are not the only taxes paid by suppliers of capital, are they? They also pay captial gains tax on any such capital gains and higher and top rate tax payers pay income tax upon their dividends over and above that corporation tax.

3) You\’re comparing total income tax paid with total corporation tax paid. But total income is rather larger than total corporate profit (very much so in fact). So the comparison is fatuous in the first place.

The identification of further errors by our PhD in Irish Feminist History as he paddles on the shores of economics is an exercise left to the reader.

15 comments on “Numpty\’s at it again

  1. it is also interesting that he doesn’t seem to realise that his graph shows that corporate profits were more impacted by both the dotcom crisis and the 2008 crisises than the salaries of the “workers”. So if we were to ignore all of Tim’s comments above alternative titles to his post could be:

    - Profiteers harder hit by recession than workers
    - Profiteers help workers through recessions

  2. Can one assume that his figure for income tax includes income tax on dividends meaning that, notwithstanding that the whole ‘argument’ is entirely bizarre, he’s actually got a decent slug of tax on the wrong side of his sums anyway.

    Oh, and he should surely disregard the income tax paid by public sector and third sector workers too… what’s that got to do with comparing the respective tax burdens of capital and labour?

  3. @ SadButMadLad

    Correct re VAT (usually, but, in any case, it is a tax on something completely different), but not NIC.

    Employee NIC’s are collected by the company from the employee and paid over, but Employer NIC’s are a real cost to the employer – so, in effect, both sides pay. In reality, employers pay more NIC than employees, as the rate is higher and the 10% drop in the rate above the upper limit (c £40k) doesn’t apply to the employer.

    Of course, if you put the NIC into Eoin’s calculation then even if you put the same value on both sides (which would be wrong) you would increase the relative percentage paid by the profiteer.

  4. OK, here’s a more sensible calculation. Ignoring what we should tax, let’s see what we actually do tax.

    1) Total UK household income from employment in 2009/10 was just shy of £700bn (ONS figures, wages plus non-cash benefits plus pensions, before deducting tax or adding State benefits).

    - Total income tax thereon was £123bn (that’s HMRC’s 2009/10 PAYE total), less £6bn of tax credits given as tax reductions (ignoring the £22bn tax credits given out as payments) gives £117bn.

    * So the average income tax rate on the poor down-trodden workers is less than 17%.

    2) Apparently corporate profits are around 12% of GDP, so around £170bn (can anyone help out with a better figure?). Add to that £76bn of non-corporate profits from the self-employed (ONS figures), gives almost £250bn.

    - Tax on that is £42bn corporation tax, plus £22bn non-PAYE income tax (mainly on business profits – self-employed, dividends etc.), plus £3bn CGT (all HMRC figures, 2010/11), giving £67bn in total.

    * So the average tax rate on the blood-sucking capitalist profiteers is almost 27% – 10% higher than the rate on the workers.

  5. “I thought profiteers (companies) don’t pay VAT”

    I think he is making the point that consumption taxes are still paid by capitalists when they spend money. It is the kind of analysis you would expect from somebody who does not understand that “tax incidence” exists.

  6. This is a logical cul-de-sac because IF the “profiteers” were to pay a greater part of their income as salaries to the workers the percentage he looks at would go further down increasing his grievance despite the workers receiving greater benefit and the company retaining less profit to tax.
    Unless I have misunderstood there is an idiot on the loose.

  7. Good point. And presumably loss making companies should cut wages until they are making sufficient profits to pay more tax than theit newly-impoverished workforce.

  8. You can get a PhD in ‘Irish Feminist History’? So at one end you have people like me, who can, say, find the integral of 1/(1 + sin 2 x) dx from 0 to π/2 (it’s unity, by the way) and at the other end you have Eoin Clarke, who’s about as societally useful as a soap hacksaw.

  9. FAIL on 3 levels.

    “Profiteer”, eh? Anyone care to critique this piece by consistently referring to “The Paddy”. Pejorative? Moi?

    4 sentences, 5 errors. See previous comments re VAT and NI in addition to TW’s 3 . Quality.

    I know nobody, but nobody, looks at history, but surely the USSR, East Germany, Cuba et al show that the loony social economic model proposed by the paddy doesn’t work?

    Mind you, I am now considering writing a piece on Irish Feminist History, so perhaps I haven’t entirely wasted 3 1/2 minutes of my life. Of course, I know fuck all about the subject, but, following the paddy’s example, I won’t let that put me off writing a forceful, opinionated piece.

  10. Does he seriously style himself as ‘Dr Éoin Clarke’ on the back of a PhD in Irish Feminist History?

    Well, I suppose strictly speaking, accurate.

    But doesn’t that strike one as being so very, very sad?

    I was a blackboard monitor at school.
    Not everyone knows that.

  11. Where does Tim find these numpties? I sometimes wonder if he invents them to make the Left look stupid.

    Eoin the feminist historian has a hilarious one up of 10 “economic facts”, starting off with the claim that we don’t need to worry about the deficit because debt as a % of GDP is lower than it was in 1945.

    But he also has a little picture (‘fact’ 2) claiming that GDP growth from 1990 to 2010 was higher in the UK than it was in the USA, Germany and France.

    Seems odd to me, and to the World Bank . They say GDP growth (constant US $) was 50% for the UK and 66% for the US.

    Maybe it’s just my biased neoliberal maths, or maybe he’s used different GDP figures, but I make 66% higher than 50%.

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