Tuesday, August 22, 2006

Mendacious figures? I'll give you mendacious figures.

In today's column, Polly Toynbee writes:

This week City dealers' bonuses soared higher than ever, to £21bn, dwarfing the £3.3bn tax take from all their inheritances.

No.  It's not just city dealers: "The ONS said the overall bonus figures cover the vast majority of Britain's companies, include [sic] bonuses to boardroom executives" says the, er, Guardian -- which also pegs the figure at £19bn.  The £21bn figure comes from this Evening Standard article, which is forecasting future bonuses and not talking about past ones.

-o0o-

Polly also writes:

Warren Buffett, giving away most of his £44bn, says: "A very rich person should leave his kids enough to do anything but not enough to do nothing."

Generous estimates of Buffet's (pre-donation) wealth do go as high as $44bn (e.g. the sometimes excitable Accra Daily Mail), though this is still comfortably below Polly's figure.  More conservative estimates have put it at around $37bn (e.g. the, er, Guardian) or about £20bn.  Not £44bn.

-o0o-

Polly also writes:

Very few ever pay inheritance tax. Just 37,000 estates paid it last year, out of 600,000 deaths. Byers bandied about the mendacious figure of 1.5 million people now caught by it, arriving at this by crudely adding up the homes of the living worth over the £285,000 inheritance tax threshold

The casual lumping together of a flow figure (37,000 per year) and a stock figure (1.5m) is disingenuous at best.  He also didn't talk about "people" but rather "properties" (source), but that's a distraction.  To see the relevance of the stock/flow issue, consider this.  If homeowners are distributed evenly across the age range of, say, 30 to 70, and they all die at 70 (yes, yes, I know I am simplifying hugely). This would mean that every year, one fortieth of homeowners would die, thereby making one fortieth of the roughly 1.5m estates with homes valued over the tax threshold liable to the tax.    One fortieth of 1.5m is about 37,500, i.e. not far off the actual figure.

Now, I am not saying that the above figures are true -- I am ignoring a lot (e.g. age distribution, particularly for ownership of expensive properties may not be even, not everyone dies at 70, etc...) deliberately -- but they do show that to compare stock and flow data you do have to understand the difference.

Calling someone mendacious for citing facts which are actually true but merely hard for the intellectually incurious to understand is a little harsh.

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