Thursday, 10 July 2014

The consequences of not mugging you

Imagine I'm walking towards you in the street. Your wallet is in your hand and I can see that it contains three twenty pound notes. We get closer. A terrible thought suddenly crosses my mind that I could snatch your wallet and run off with £60. We draw still closer and, as we are about to pass, I abandon the criminal thought and go about my day.

As a result of not stealing from you, you are now £60 better off than you would have been. If you had a warped view of the world, you could almost say that I have saved you £60, but even a warped thinker would not would claim that I have actually given you £60.

Take another example. I am walking down the street with £20. The thought suddenly occurs to me that I could double my money by putting it on a greyhound. I spontaneously walk into a betting shop, stick my money down on Bonny Lad and watch the race. The dog comes last, I lose my money and I walk out.

I have lost £20. If you are a fan of rhetoric, you could argue that my bet has cost society £20. After all, I am a member of society. It would be a difficult argument to make and you would be wrong, but you could make it. And yet nobody would seriously claim that my losing bet has cost the taxpayer £20.

These might seem silly examples of logical failure, but they are endemic in the public health racket whenever they talk about the 'costs' of various activities. In the last few days, there have been three examples which nicely illustrate this.

Firstly, as Dick Puddlecote has mentioned, Theresa May, the British home secretary, recently asserted that "Alcohol-fuelled harm costs taxpayers £21 billion a year." This is the common or garden alcohol cost error and would almost be forgivable if it had not been May's ministerial department that came up with the figure in the first place. Her mistake is simple. She has taken an estimate that mainly consists of intangible, internal and/or private costs and pretended that they are all financial costs to the government. They're not (see The Wages of Sin Taxes for details). This happens all the time.

Secondly, Tobacco Control magazine recently published a study with the self-explanatory title 'Economic cost of smoking in people with mental disorders in the UK'. It found...

Results The estimated economic cost of smoking in people with mental disorders was £2.34 billion in 2009/10 in the UK, of which, about £719 million (31% of the total cost) was spent on treating diseases caused by smoking. Productivity losses due to smoking-related diseases were about £823 million (35%) for work-related absenteeism and £797 million (34%) was associated with premature mortality.

As is typical of these kind of studies, the authors don't look at potential savings and so all we have are the costs, not the (more relevant) net costs. Nevertheless, the authors' findings are quite clear. Treating smoking-related diseases amongst this group costs £719 million per annum and it is reasonable to assume, this being Britain, that the lion's share of that treatment is provided by the state and is therefore paid by the taxpayer.

On top of that, there are various costs to individuals and (to some extent) to private businesses, notably lost productivity and absenteeism, as well as the intangible, non-financial cost of premature mortality. These 'costs' do not involve money being spent by anyone. At best, the individual misses out on some extra income.

In short, the only part of the £2.34 billion total that affects taxpayers is the 31 per cent (£719 million) that goes on health care.

But here's how the BMJ promoted the study...



To which I responded...



You might think that the BMJ would blame a slip of the tongue for this mistake, but instead they doubled down and proved that they really don't understand the difference between taxpayers spending money on something and individuals bearing a private cost or forgoing income (you can see their next tweets here and here).

Finally, let's take an example from the third leg of the 'public health' stool—diet—starting with the tweet that led me to it:



The government is taking taxpayers' money and giving it to businesses to spend on advertising? That's outrageous! Or rather it would be outrageous if it were true. Instead, it turns out that the Centre for Science in the Public Interest has a peculiar definition of a subsidy:

Urge Congress to End Taxpayer Subsidies for Junk Food Marketing to Children

With one-third of kids overweight or obese, should U.S. taxpayers be subsidizing junk food marketing to children? Under current tax law, companies are allowed to deduct expenses for advertising and marketing unhealthy foods to children. Please help us to end that obesity-promoting tax loophole.

Marketing is a cost of doing business and is therefore a legitimate expense that comes off the bottom line. Salaries to staff are also business expenses, but would anyone claim that the taxpayer is subsidising the salary of McDonalds' CEO? Would anyone claim that the taxpayer is subsidising the photocopying at Burger King? No. These are expenses and businesses do not pay tax on expenses, only on profit.

What CSPS are really saying is that they don't like 'junk food' advertising and think that food companies should pay additional taxes for the right to advertise. But even if you are warped enough to think that advertising isn't a legitimate business expense, a tax break is not a subsidy.

It is true that the government has less money as a result of not taxing McDonalds' advertising, but it is also true that the government has less money as a result of not introducing a beard tax or a window tax. Is the taxpayer subsidising growers of beards or owners of windows? Only if you are looking down the wrong end of the telescope.

The only way in which you could consider a tax break to be a subsidy is if you believe that the government is entitled to all your money and that anything it allows you to keep is tantamount to a gift. And this brings me back to my original analogy.

I stroll past you in the street without snatching your wallet. As I walk away I begin to feel resentful. You have £60 more than you would have done had I acted on my impulse. I have £60 less than I would have done. It's not fair! I have subsidised you!

Would my reaction be reasonable? Or would I, in fact, be a confused, criminal sociopath?

3 comments:

Geoffrey Cliff said...

Beautifully argued as ever. One thing is worth adding though. By not mugging me, I am £60 better off than I might have been. You, on the other hand are £60 worse off than you might have been. The net difference between us is thus £120. Such inequality is unfair and the government should act immediately to correct this lamentable state of affairs. A royal commission should be set up immediately!

Devil's Kitchen said...

"Marketing is a cost of doing business and is therefore a legitimate expense that comes off the bottom line. Salaries to staff are also business expenses, but would anyone claim that the taxpayer is subsidising the salary of McDonalds' CEO?"

And, of course, by paying a salary to workers, bosses are subsidising their junk food diets. Thus leading to the inescapable conclusion that paying any money to anyone is, in fact, leading to ill health.

DK

Furor Teutonicus said...

XX The only way in which you could consider a tax break to be a subsidy is if you believe that the government is entitled to all your money and that anything it allows you to keep is tantamount to a gift. XX

Seeing the amount of people at budget time that are wetting their nickers over a reduction of 0.1% in income tax (forgeting the increase of 15% on beer, tobacco and petrol, of course), then that is EXACTLY how the normal and average imbicilic member of the voting public thinks.