You are wrong then

In the sense that it is unarguable that the hit to your disposable income from a price rise is equal to:
- the proportion of income you spend on something, x it's percentage price change.

So if these three things were satisfied:
- we have the same income as Chuck
- we buy the same amount of oil as him
- we both choose to carry on buying the same amount after the price goes up

then the hit to our disposable income is identical.

(I've done the maths on this a while ago for something else, funnily enough.)

In fact you're right, really, because we *don't* use as much oil as them. Probably *because* of the higher tax.

So in that sense, higher tax does mean we are hit less hard than them. But that's a behavioural impact, rather than anything to do with the % change in the price being smaller.

(Indeed, if we bought more oil than them, then a smaller % change in the post-tax price would still mean we'd be hit harder than them.)

Posted By: Tricky Hawes on June 13th 2008 at 14:06:47

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