INNUMERATES RULE! How have the “very rich” fared under Bush? The innumerate Times fails to say: // link // print // previous // next //

FOREWARNED: Sadly, Florida could win tonight. If they do, we’ll explain why we said so.

INNUMERATES RULE: “Bush Tax Cuts Offer Most For Very Rich, Study Finds.” That’s the headline in today’s Times; beneath it, we learn about a new CBO study which concerns the effects of Bush’s 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 Bush’s 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. Let’s 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.

We’re fairly sure that Andrews believes that. But in fact, Andrews’ report doesn’t 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 isn’t 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 it’s a work of screaming incompetence. How have the “very rich” fared under Bush? Uh-oh—this report doesn’t say.

Quick overview: Andrews describes a new study of Bush’s tax cuts by the non-partisan CBO. Why is this new study potentially instructive? “Economists and tax analysts have long known that the biggest dollar value of Mr. Bush's tax cuts goes to people at the very top income levels,” Andrews correctly writes. “But the Congressional study offers additional insight because it incorporates information about what people paid in 2004, the first year in which taxpayers could take full advantage of the cuts on stock dividends and capital gains.” In that passage, Andrews describes what’s new—and potentially instructive—about this CBO study. But this is one of the only passages in which Andrews doesn’t bungle. Let’s start with the following passage—a passage which tends to cut against Bush:

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.

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.

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). It’s 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.

But Andrews also makes outright blunders—blunders which tend to help Bush’s side in our often-incoherent tax debate. How do Bush’s cuts affect the “very rich,” the category cited in the Times headline? As a matter of fact, you can’t tell from this study—and Andrews doesn’t seem to know that.

Let’s start with the outright blunder contained in Andrews’ opening paragraph (see full quote above). Is it true? Does this new study show that “[f]amilies earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country?” In fact, this study doesn’t report on “families earning more than $1 million a year;” according to Andrews, the richest group the study describes is “the top one percent,” whose household incomes start somewhere near $400,000. Yes, this group has an average income of $1.25 million (see quote by Andrews above)—but it includes many families which earn far less. Andrews description in paragraph 1 is just wrong—and yes, it makes a difference. Here’s why:

Bush’s tax cuts have never really been about “the top one percent.” His tax cuts have mainly been aimed at those who are truly the “very rich”—at those in the top one-tenth of one percent, let us say. How have these people—the top one-thousandth—fared under Bush’s tax cuts? There’s no way to tell from this CBO study, and no way to tell from Andrews’ report. But Andrews writes as if “the top one percent” is the richest group he can imagine. Quick note: If we did see a report on how “families earning more than $1 million a year” have fared, the numbers would be eye-popping. We’ll guess: They’ve done far better than those found near the bottom of the top one percent.

And good God, how Andrews bungles at the end! He offers a deeply weak presentation—one which again favors Bush:

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.

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.

Good God, that’s 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 we’ve 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? It’s 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. He’ll omit their percentage of income too—just as Andrews has done.

This is a woeful report by Andrews; it omits relevant data—or commits outright blunders—in almost every paragraph, including the first. But good God! How innocent our top figure filberts can be! Try to believe that Andrews said this, near the end of his piece:

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 don’t understand so simple a matter. This helps explain why our debates about these topics remain so inept, so unrefined.

How have the “very rich” fared under Bush? Edmund Andrews’ report doesn’t say. But innumerates seem to be doing quite well. This is clear in his opening paragraph.

POINTS TO CARRY AWAY: The “top one percent” is not the richest group we can imagine. Bush’s policies have been aimed at those who are truly the “very rich”—those at the top of the top one percent. If we restrict our discussion to “the top one percent,” we miss the most striking results of these cuts—and we do Bush’s grandees a favor.

Note: Among households at the top of the top one percent, you’ll find the owners of the Post and the Times. Ditto such Nantucket grandees as Buffalo’s Tim Russert.

SO TOO AT THE POST: We had a somewhat similar reaction to this Post editorial about Bush’s tax cuts. Elsewhere, liberals have praised this editorial—much too generously. Tomorrow, we’ll tell you why.