Howling Dog Graphic
Point. Click. Search.

Contents: Archives:

Search this weblog
Search WWW
Howler Graphic
by Bob Somerby
E-mail This Page
Socrates Reads Graphic
A companion site.

Site maintained by Allegro Web Communications, comments to Marc.

Howler Banner Graphic
Caveat lector

DESPERATELY SEEKING DATA (PART 2)! How much tax do the rich really pay? We read Altman—and things got unclear:


TEACHING IT ROUND: Yikes! Could Daniel Altman’s chart be accurate? As we noted yesterday, a remarkable chart in the New York Times seemed to contradict our most basic conceptions (see THE DAILY HOWLER, 1/27/03). How much do different groups pay in taxes? According to the Altman chart, if you consider all kinds of taxation—federal, state and local—low and high earners pay roughly the same percentage of their income in taxes:

Top fifth of earners: 19 percent
Next fifth of earners: 17 percent
Middle fifth of earners: 16 percent
Next fifth of earners: 14 percent
Bottom fifth of earners: 18 percent
If Altman’s chart is on the money, the top fifth of earners—average income, $117,000—pay 19 percent of their income in taxes. The bottom fifth—average income, $8000—pay roughly the same percentage. Surely, this information, if accurate, would come as a major surprise to most people. As Tim Noah said in Slate, with clear surprise: “Tax rates are already flat!”

But is Altman’s chart really accurate? Midway through the article which accompanies the chart, Altman seems to say something different. The chart’s figures “can be misleading,” he says, because they “focus on just one year.” We’ll reproduce his entire passage—a passage we don’t understand. We suspect it may challenge you too:

ALTMAN: The figures also focus on just one year, which can be misleading, since people may have high incomes while they work and low incomes after they retire.

A recent study by Laurence J. Kotlikoff, a professor of economics at Boston University, and his co-authors took these criticisms to heart. They calculated average tax rates for entire lifetimes. To encompass the government’s role completely, they factored in virtually all entitlement programs, like Medicare and food stamps, in addition to taxes.

For a couple who earn the minimum wage, Professor Kotlikoff calculated a lifetime negative tax rate, or subsidy, of 32 percent. The rate becomes positive quickly, though, rising to a tax of 30 percent for couples earning just three times the minimum wage. For the families with the highest incomes, the tax rate reaches about 50 percent.

What exactly does that passage mean? If we hadn’t already seen Altman’s chart, we’d think it meant that low earners pay 19 percent in taxes, but get back so much in entitlement payments that they have a net gain of 32 cents on the dollar. And we’d think that couples “earning just three times the minimum wage” pay 30 percent of their income in taxes. Why then does Altman’s chart seem to say that no income group pays more than 19? We’re not the stupidest people we know. But this piece pretty much has us stumped.

And Noah doesn’t help us out in his discussion in Slate. Here’s how he limns this conundrum:

NOAH: Altman points out that the universal tax-distribution picture does change somewhat when we shift from a current-day snapshot to a more longitudinal analysis. Citing a study by Laurence Kotlikoff, a Boston University economist, Altman writes that over a lifetime, couples whose annual income averages out to the minimum wage receive 32 cents in government benefits for every dollar they earn, while households whose annual income averages out to $1 million pay 51 cents on every dollar earned…This analysis shows the tax system to be more progressive than Altman’s chart.
The tax system is “more progressive than Altman’s chart?” We’ll say! Noah seems to be saying that low earners gain 32 cents from the government for every dollar they earn, while high earners pay out 51. The chart made it seem that the tax code is flat. This makes it seem wildly progressive.

Which is it? Do high earners pay 19 percent in taxes (chart) or 51 percent (Noah’s text)? Here at THE HOWLER, we don’t have a clue. Which leads us to our next installment as our desperate search for data continues. Wednesday: Desperately seeking Robert McIntyre.

MORE ON THAT TAINTED TENTH: We received an e-mail challenging our tone on the “affirmative access” plan in Texas. Our mailer laid it right on the line. “I think there really is merit to the ‘race-neutral’ 10 percent plan here in Texas,” he said, “and I don’t think it is a mark of stupidity to think so.” Indeed, we don’t have a huge problem with the plan, although—as a significant downside—it does encourage minority kids to stay in low-achieving neighborhood high schools. Our biggest problem with the plan is the phony way it’s been used politically. Clearly, the Texas plan was devised for one reason—to help lower-scoring minority kids get into UT. But President Bush—insisting that the plan is “race neutral,” and tossing around his new favorite word, “quota”—used the plan to bash UM leaders who pursue the same objective. The difference? Michigan pursues its objective openly; Texas does so in disguised fashion. Despite its downside, the UT plan may be A-OK. But Bush’s use of the plan has been phony and fake. What ever happened to “uniting not dividing” and “changing the tone up in Washington?”

The Daily update

THERE HE WENT AGAIN: We’re sure Bill Keller’s a very nice guy. But we tried to warn you about his work when he penned that ludicrous column last summer—the one where he quoted his three-year-old daughter saying how boring Gore is. (Links below. Keller also trashed all other Dem hopefuls, complaining, for example, that John Kerry took home movies when he served in Vietnam.) Trust us—scribes who quote their three-year-old children are trying to tell you how silly they are, and Keller has surely completed the task with his pandering piece in this Sunday’s Times magazine. Profiling Bush, Keller fawns long and hard—and shows off those Millionaire Pundit Values. We’ve warned you that your millionaire scribes simply don’t care about normal people. But we don’t know when we’ve seen a pundit revel so much in that fact:

KELLER: Bush has already surpassed Reagan in advocating a shift of responsibilities from government to the private sector, and from the federal governments to the states…You could easily imagine Reagan’s husky chuckle the other day as Bush announced plans to outsource up to 850,000 federal jobs—about half the government’s civilian work force—to private contractors. This is on top of the 170,000 federal employees who will lose most of their contract protections when they are folded into the new Department of Homeland Security.
Nice guy! Keller pictures Reagan callously chuckling as hundreds of thousands of normal people lose job protections for which they have bargained. But why should we be so surprised at this image, when Keller—speaking with an approving tone, as he does throughout this piece—sketches out Bush’s bold vision:
KELLER: What Bush is striving for, on the evidence of the choices he has made so far, is bold in its ambition: markets unleashed, resources exploited. A progressive tax system leveled, a country unashamed of wealth. Government entitlements gradually replaced by thrift, self-reliance and private good will. The safety net strung closer to the ground.
Finally! Progressive taxation will finally end and wealth will again dare speak its name! Throughout this profile, Keller showers praise on this oddball vision, which he fawningly fobs off on Bush. You’ll have to read the piece yourself to take in Keller’s pandering tone. But through the course of his 8000 words, Keller never shows the slightest concern about these remarkable values.

But then, we’ve warned you about Millionaire Pundit Values. Like many high-toned modern pundits, Keller doesn’t seem to spend too much time worrying about normal people. Insouciance is his all. “There is little prospect…Bush will actually shrink the government,” he says at one point. “Reagan asked Americans to dream heroic dreams, but he rarely asked them to give up anything. President Bush, even with a war on, shows no greater desire to bet on sacrifice.” But is that true? A few paragraphs earlier, Keller discussed Bush on Social Security:

KELLER: Martin Feldstein, who was chairman of Reagan’s Council of Economic Advisers, said they couldn’t figure out a way to [privatize Social Security] without arousing a panicky backlash among elderly voters. When Feldstein worked with candidate Bush on the design of his tax and Social Security proposals, though, he was impressed that Bush had discerned a new political opportunity that may outweigh the fears of the elderly. Polls showed that younger and middle-aged voters were comfortable with individual retirement instruments like 401(k) programs. Moreover, the anxiety about whether Social Security will be around when they retire, which has always been seen as an argument for shoring up the status quo, is in Bush’s mind an argument for inventing something new.

Thus while the administration is still debating the timing of an assault on Social Security—are voters ready for it before 2004? How big a setback was the implosion of Enron’s retirement plan?—the president no longer regards Social Security as the lethal “third rail” of American politics. It is likely to be one of the big bets of his presidency.

But what kinds of “sacrifices” might privatization involve? Keller shows no sign of knowing or caring. As pundits did throughout Campaign 2000, Keller skims the surface of Bush’s ideas. Meanwhile, he assures us that Bush will require no “sacrifice.” We doubt that he has the slightest idea whether or not this is accurate.

Why is Keller so free-and-easy? Here at THE HOWLER, we don’t really know. But during Campaign 2000, pundit opinion strongly favored Bush’s ideas on Social Security (links below); the likely explanation had already been limned by Julie Kosterlitz in the National Journal. Kosterlitz wrote on January 9, 1999, before Bush’s ideas became an issue:

KOSTERLITZ: Social Security increasingly strikes the affluent as a bad financial deal. When the program was newer, it could offer generous benefit increases by increasing taxes on a fast-growing crop of young workers—creating large windfalls for rich as well as poor retirees. But as the program ages and demographics change, it’s not feasible to raise taxes enough to sustain such windfalls. For new retirees, particularly the affluent, the benefits of Social Security are fading in relative importance to other retirement income; this may diminish political support for the program among wealthy elites and opinion makers.
As Kosterlitz suggested, “wealthy elites and opinion makers” like privatization because it’s a good deal for them. And by the time Bush proposed his ideas in May 2000, the pundit class was clearly behind them. On the Beltway Boys, Fred Barnes laid it out for Mort. “Elite opinion—in other words, the bigwigs, the opinion-makers, people like you, Mort—have changed their mind, and are now, I think, sympathetic to the Bush plan and think that Gore is just being a reactionary liberal” for opposing privatization. On Capital Gang, Al Hunt said much the same thing. “Bush is winning among the elites, and I think in the press coverage” of his proposal, Hunt said. Now Keller seems to say that there’s no risk in the plan. And it’s quite true—there’s no risk for him.

You’ll have to read this piece for yourself to pick up its remarkable tone. Why does Keller fawn so fully? Here at THE HOWLER, we don’t have a clue. But dudes! Would Reagan have laughed at those laid-off workers? We doubt it. But Bill Keller will!

DEPERATELY SEEKING SACRIFICE: In this morning’s Post, E. J. Dionne suggests there may be “sacrifice” in Bush’s Medicare plan. You know what to do. Just click here.

Keller’s daughter found Gore dull. See THE DAILY HOWLER, 8/13/02.

Keller withdrew his foolish remarks about Kerry. See THE DAILY HOWLER, 9/9/02. (Maybe he should have discussed Kerry’s hair.)

During Campaign 2000, pundits refused to examine Bush’s SS ideas. See THE DAILY HOWLER, 5/14/02, 5/15/02, 5/17/02, 5/20/02.