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||DESPERATELY SEEKING DATA (PART 2)! How much tax do the rich really pay? We read Altmanand things got unclear:|
TUESDAY, JANUARY 28, 2003
TEACHING IT ROUND: Yikes! Could Daniel Altmans 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 taxationfederal, state and locallow and high earners pay roughly the same percentage of their income in taxes:
Top fifth of earners: 19 percent
If Altmans chart is on the money, the top fifth of earnersaverage income, $117,000pay 19 percent of their income in taxes. The bottom fifthaverage income, $8000pay 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!
Next fifth of earners: 17 percent
Middle fifth of earners: 16 percent
Next fifth of earners: 14 percent
Bottom fifth of earners: 18 percent
But is Altmans chart really accurate? Midway through the article which accompanies the chart, Altman seems to say something different. The charts figures can be misleading, he says, because they focus on just one year. Well reproduce his entire passagea passage we dont 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.
What exactly does that passage mean? If we hadnt already seen Altmans chart, wed 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 wed think that couples earning just three times the minimum wage pay 30 percent of their income in taxes. Why then does Altmans chart seem to say that no income group pays more than 19? Were not the stupidest people we know. But this piece pretty much has us stumped.
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 governments 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.
And Noah doesnt help us out in his discussion in Slate. Heres 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 Altmans chart.
The tax system is more progressive than Altmans chart? Well 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 (Noahs text)? Here at THE HOWLER, we dont 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 dont think it is a mark of stupidity to think so. Indeed, we dont have a huge problem with the plan, althoughas a significant downsideit does encourage minority kids to stay in low-achieving neighborhood high schools. Our biggest problem with the plan is the phony way its been used politically. Clearly, the Texas plan was devised for one reasonto help lower-scoring minority kids get into UT. But President Bushinsisting that the plan is race neutral, and tossing around his new favorite word, quotaused 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 Bushs 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: Were sure Bill Kellers a very nice guy. But we tried to warn you about his work when he penned that ludicrous column last summerthe 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 usscribes 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 Sundays Times magazine. Profiling Bush, Keller fawns long and hardand shows off those Millionaire Pundit Values. Weve warned you that your millionaire scribes simply dont care about normal people. But we dont know when weve 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 Reagans husky chuckle the other day as Bush announced plans to outsource up to 850,000 federal jobsabout half the governments civilian work forceto 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 Kellerspeaking with an approving tone, as he does throughout this piecesketches out Bushs 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. Youll have to read the piece yourself to take in Kellers pandering tone. But through the course of his 8000 words, Keller never shows the slightest concern about these remarkable values.
But then, weve warned you about Millionaire Pundit Values. Like many high-toned modern pundits, Keller doesnt 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 Reagans Council of Economic Advisers, said they couldnt 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 Bushs mind an argument for inventing something new.
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 Bushs 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.
Thus while the administration is still debating the timing of an assault on Social Securityare voters ready for it before 2004? How big a setback was the implosion of Enrons 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.
Why is Keller so free-and-easy? Here at THE HOWLER, we dont really know. But during Campaign 2000, pundit opinion strongly favored Bushs 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 Bushs 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 workerscreating large windfalls for rich as well as poor retirees. But as the program ages and demographics change, its 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 its 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 opinionin other words, the bigwigs, the opinion-makers, people like you, Morthave 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 theres no risk in the plan. And its quite truetheres no risk for him.
Youll have to read this piece for yourself to pick up its remarkable tone. Why does Keller fawn so fully? Here at THE HOWLER, we dont 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 mornings Post, E. J. Dionne suggests there may be sacrifice in Bushs Medicare plan. You know what to do. Just click here.
VISIT OUR INCOMPARABLE ARCHIVES: Kellers 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 Kerrys hair.)
During Campaign 2000, pundits refused to examine Bushs SS ideas. See THE DAILY HOWLER, 5/14/02, 5/15/02, 5/17/02, 5/20/02.