INNUMERATES RULE: Bush Tax Cuts Offer Most For Very Rich, Study Finds. Thats the headline in todays Times; beneath it, we learn about a new CBO study which concerns the effects of Bushs tax cuts. But the problems with Edmund Andrews report begin right in that misleading headline, and continue all through his piece. To his credit, the Times figure filbert is an equal opportunity bungler; some of his errors and omissions tend to cut against Bush, some of them will fuel Bushs defenders. But how have the very rich fared under Bush? Andrews report never says—and Andrews shows no sign of knowing.
Andrews bungling is truly remarkable. Lets start with that opening paragraph:
ANDREWS (1/8/07): Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush's tax cuts, according to a new Congressional study.Were fairly sure that Andrews believes that. But in fact, Andrews report doesnt discuss federal tax rates of families earning more than $1 million a year; it discusses federal tax rates of the top one percent, a very different critter. Meanwhile, did the top one percent see their federal tax rates drop more sharply than any group in the country? That isnt unambiguously true, either. This is a true stunning report—stunning for the grinding innumeracy displayed by the Times number-one figure filbert. This report appears at the top of our public discourse—and its a work of screaming incompetence. How have the very rich fared under Bush? Uh-oh—this report doesnt say.
ANDREWS: The study estimates that the effective federal income tax rate, which excludes payroll taxes for Social Security and Medicare, declined modestly for people in the middle- and lower-income categories.From those data, we can derive these facts: The income tax bill of middle income households declined by 42 percent (from 5 percent of income to 2.9 percent), while the bill for households in the top one percent declined by roughly 19 percent (from 24.2 percent to 19.6). Its true that households in the top one percent gained far more money as a result of these changes; that is true because their tax bills, in dollar terms, were much larger to start with. But Andrews is somewhat selective in his account of the change in those federal income tax rates. This is one of the omissions in this piece which will tend to favor Bush critics.
Families in the middle fifth of annual earnings, who had average incomes of $56,200 in 2004, saw their average effective tax rate edge down to 2.9 percent in 2004 from 5 percent in 2000. That translated to an average tax cut of $1,180 per household, but the tax rate actually increased slightly from 2003.
Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000.
ANDREWS: The report shows that a comparatively small number of very wealthy households account for a very big share of total tax payments, and their share increased in the first four years after Mr. Bush's tax cuts.Good God, thats awful—perfect grist for the pseudo-conservative talk radio mill! The top 1 percent paid about 36.7 percent of federal income taxes and 25.3 percent of all federal taxes in 2004, Andrews writes. Tribunes of the truly rich (read: Sean Hannity) simply luvv reciting such data, which let us imagine that this group is paying far more than its share. (The top one percent pay 37 percent! Presented that way, it can sound quite unfair.) But as weve noted again and again, figures like these are deeply misleading unless you also tell your readers what percentage of income this group has earned. Is it unfair when a group pays 25 percent of federal taxes? Its hard to know how to answer that question—unless you know what percentage of income this group has received. Hannity will trumpet this part of Andrews report as proof of how heavily the top one percent are taxed under Bush. Hell omit their percentage of income too—just as Andrews has done.
The top 1 percent of income earners paid about 36.7 percent of federal income taxes and 25.3 percent of all federal taxes in 2004. The top 20 percent of income earners paid 67.1 percent of all federal taxes, up from 66.1 percent in 2000, according to the budget office.
By contrast, families in the bottom 40 percent of income earners, those with incomes below $36,300, typically paid no federal income tax and received money back from the government. That so-called negative income tax stemmed mainly from the earned-income tax credit, a program that benefits low-income parents who are employed.
ANDREWS: The budget office offered little commentary on its new estimates, but many of its numbers spoke for themselves.Good God! Readers, numbers never speak for themselves; numbers always must be interpreted, placed in some sort of context. But at the top of our public discourse, we find analysts who dont understand so simple a matter. This helps explain why our debates about these topics remain so inept, so unrefined.