Having advised myself to leave Richard Murphy alone, here I go again. I've had a conversation with him on his blog. Stripping out other lines of discussion (from me in the first post, from him thereafter) it went like this:
Me: You keep repeating that HMRC’s figures imply the 50% rate raises an additional £6.7 billion, but you know that’s not true, because you did your calculation on total income ignoring tax reliefs.
RM: No I did not do my income on total incomes ignoring tax reliefs. I did it on their estimate of those paying the 50-p tax rate – i.e. after tax reliefs
Me: Have another look at the HMRC table. The first column is labelled “Range of total income”. It’s pretty obvious that this includes tax reliefs, because not all the people earning over £150,000 are paying Additional Rate tax. Your calculations use the column “Total income of taxpayers”: it’s pretty obvious that includes tax reliefs too because it would be absurd to be inconsistent about it, and because otherwise the “Average amount of tax” numbers would be too low.
RM: But I only considered the tax paid by those paying at 50%. And therefore you’re wrong. And I note the fact that I allowed for this in doing my calculations. But no doubt you did not read the report I wrote.
Me: I’m looking at p19 of your report. Let’s take the row for taxpayers with total incomes over £1mn. You find an average income for them by taking their total income (which I think we agree includes tax reliefs) and dividing by the “Number of taxpayers in income bracket”. Then you subtract £150k to get “Part of income subject to 50% tax rate on average”. You take a tenth of that to find the effect of cutting the rate to 40%. At no point in that calculation do you subtract anything for tax reliefs.
RM: Because I don’t need to do so – HMRC have.
Me: Are you saying that “Total income” in the HMRC table is really “Income net of allowances and reliefs”?
RM: Tell me what else it is
Me: It’s total (declared) income.
RM: And as I’ve pointed out – I’ve allowed for that. Please stop wasting my time.
Does he think the total income data he used are for total income, or does he think they're net of tax allowances and reliefs? He says he doesn't have to subtract tax reliefs because HMRC have done it already. Then when I tell him the HMRC data is for total income, he says he's allowed for that. It's as if he thinks it doesn't matter what the numbers mean, the calculation will magically work correctly anyway, because he "only considered the tax paid by those paying at 50%".
Ah well, someone is wrong on the internet. If you think it's me, please do explain.
Update: I had another conversation with him, in the comments to this post (which is much worse than the relatively small error I was banging on about above). I recognize that it was foolish of me to do so. I'm adding this note mainly as a reminder to myself never to do it again.