NY Times fails math

It seems the New York Times is not very good at math (which may be a good thing since math is racist), but pretty good at promoting Democratic political spin.

The paper of record discovered a shocking fact when evaluating IRS data - when taxes are cut rich people get more money.

Here's another shocker from the Times "study" - people with annual incomes over $1 million tend to have investments and benefit from tax cuts on investments.

This study was reported on by CNN as big news "Study: Bush tax cuts making rich richer." Yeah, and? Bush tax cuts are also making the poor richer. I speak from experience.

The Times seems to do one of these studies every time a tax cut becomes law and every time they breathlessly report that the cut "makes the rich richer," "benefits the rich," "heavily favors the wealthy," etc.

Here's the problem - for the calendar year 2003, the share of total income taxes paid by the top 1% of wage earners actually rose from 33.71% to 34.27%. Even though they got more in actual dollars in tax cuts, they paid more when you evaluate the percentages.

The top 1% are not multimillionaires, they are individuals are couples filing jointly who make above $295,495. Now, for me, that is a lot of money, but not what people think of when you NYT talks about "the rich."

The bottom 50% of American taxpayers, myself included, pay only 3.46% of all the income taxes paid (down from 3.5% in 2002). So the top 1% pay close to ten percent more in taxes than the bottom half.

Not much can be done to cut the amount of money the bottom half pay - we don't pay much to start with. I know personally, I get all my money back from the government plus some.

But when you give some one making millions of dollars a small percentage tax cut, the raw numbers look skewed way in favor of the rich. There is no way I can get a tax cut of $500,000 because I don't make that much to start with. But I pay a gigantic amount less in taxes that the millionaire does.

The millionaire pays more in actual dollars, he gets back more in actual dollars. Why is that so hard to understand?

The NY Times and CNN purposely mislead readers to further enforce the notion that Republicans and President Bush are for the rich and don't care about the middle and lower classes.

While he may be a biased source, Rush Limbaugh has an excellent section on this. All of his numbers and stats come from the most recent IRS numbers. His charts show graphically the difference in taxes paid.

Comments

[Sam]

Aaron,

Republicans are for the rich and neither the middle nor poorer classes. The rich don't need their taxes cut. They've got plenty of money either way. Meanwhile, you probably shouldn't even be paying taxes, what with a kid and your small income. The fact of the matter is that the Bush Administration couldn't care less about those who aren't in the higher tax brackets.

[seeker]

This is the problem. Liberals argue dollars, while conservatives argue percentages. I think a flat percentage is more just, rather than penalizing the successful. And in most flat tax proposals, those under a certain income level pay NO taxes.

[seeker]

I also buy the argument that if you pay more, you should get more back in tax cuts. I think the graduated tax is unjust. It penalized the successful and hardworking. It's borderline socialism.

[RationalSean]

Actually, a flat percentage is *unjust* - it penalizes people who work for a living as opposed to those whose income is primarily from investments. It's also bad for economic growth because it sets up bad incentives.

It always boggles my mind when I see non-trust-fund-babies drinking the Kool-aid. It's OK to support a flat tax, even if it is not in your best interests, but it would be better to support it *knowing* exactly how it's screwing you at the very least. Have you ever wondered why most economists are against a flat tax? Or are they (along with, of course most biologists/geographers/paleontologists/sentient beings) somehow part of some giant anti-Christian/liberal/commie conspiracy?

[Sam]

How on Earth can you seriously argue that the rich are somehow "harder working" than the rest of us? Is there absolutely any evidence whatsoever to back this ludicrous claim? The rich are the benificiaries of endless breaks and automatic advantages - they haven't worked hard. Most have simply been given everything they've ever gotten.

[Aaron]

Actually Sam and RationalSean - most of the wealthy are not "trust-fund-babies" or "the benificiaries of endless breaks."

From the link I gave: "John Weicher, as a senior fellow at the Hudson Institute and a visiting scholar at the Federal Reserve Bank, wrote in his February 13, 1997 Washington Post Op-Ed, 'Most of the rich have earned their wealth... Looking at the Fortune 400, quite a few even of the very richest people came from a standing start, while others inherited a small business and turned it into a giant corporation.'"

In fact it is most often the trust-fund-babies and those whose wealth has been inherited (*cough*Kennedy*cough*), not earned that are the most liberal in their economic policies. Those who have worked hard and earned it, tend to be more conservative.

The flat tax has it's advantages and disadvantages, but I think the most fair tax is a flat consumption tax, with exceptions for groceries and the like. If you don't want to pay anything you don't have to buy anything. The rich, who buy more things and more expensive things, would pay the most. While the poor who spend most of their money on food items would pay little if anything.

And no it would not hurt economic development because people would have more expendable income with which to buy things and invest, spuring economic growth.

The rich are not automatically harder-working than the rest of us, but they are not automatically given "breaks" and "advantages" either. But regardless of how they got their wealth, why punish them simply because they have money?

I have a question for those who think the rich don't need tax cut - who employs you? Now for a few of us it is the government or a non-profit, but for most Americans it is a "rich person." If that rich person or company has more money through tax cuts, that enables them to hire more people, raise wages, lower costs, etc. If you raise their taxes, they are not going to simply eat the loss, they will cut jobs, wages or raise prices on what they sell.

It is a benefit to everyone for the "rich" to get their taxes cut. It is no coincidence that every time tax cuts are put into effect the economy grows, unemployment drops, etc.

Why engage in class envy and class warfare? Sam, if you and I wanted to make more money we could go out and do something that pays better, but we like our job for whatever reason. We are doing something we like. We may think we deserve more pay, but that is not the fault of "the rich" as if they are some big evil monolithic group intent on keeping the little guy down.

Our economy does not require one person to go down for someone else to go up. There is always money to be made out there. The list of millionaires and billionaires is always growing and not just because of inflation. People work hard and become successful. Why punish that?

[Lonnie]

In fact it is most often the trust-fund-babies and those whose wealth has been inherited

(*cough*Bush*cough*)

But beyond the name calling... I think Aaron has some valid points here. The "rich" get tax breaks because they (generally) exploit LEGAL tax exemptions designed to help business.

Remember the "Humvee" Tax break where a business or individual could write off $100,000 for the SUV's? That was a tax break designed to help farmers in the 80's. (It was for any vehicle over 3 tons, if memory serves)

The thing is, it is not only the rich who can exploit these... granted, they have accountants who help them, but anyone can do it. If you are really pissed off, write your congress-man-person. Otherwise read something like this and maybe you will get rich yourself. You have to do some work, but nothing is free.

Our economy does not require one person to go down for someone else to go up.

The overall wealth has increased significantly, even for poor families (and remember that is a ever-increasing poverty bar value there, (ir)RationalSean) over the past 50 years.

The simple laws of supply and demand dictate that if everyone makes more money that prices will go up unless productivity grows at the same rate. Simply handing out more money without demanding greater productivity in return leads to inflation and an exasperation of the problem

[Aaron]

I wasn't name-calling. The Kennedy bit was a throw-away thing, the rest was entirely substantive. I don't mind the Bush bit, either. He did inherit money and other things.

But for once Lonnie, I agree with you on what you said.

[RationalSean]

Lonnie,

Yes, of course per capita GDP has increased over the last 50 years as it has generally tended to since the Industrial Revolution.

What has *decreased* is social mobility which is directly related to rising income inequality. All of us today are far more likely to wind up in the same or lower socioeconomic class than our parents than we would have been had we been Baby Boomers. Federal investment such as the GI Bill created the American middle class by providing opportunity for those who sought it.

The arguments against a flat tax and for such things as estate taxes spring from a simple source that goes to the heart of the American revolution against the European model of inherited socioeconomic class - it is better encourage equality of opportunity as far as humanly possible.

[Aaron]

it is better encourage equality of opportunity as far as humanly possible.

I totally agree with that, so what am I missing? How does equality equate with punishing rich people for having money?

Where does your data come from as far as us being more likely to be in the same class or lower? I'm just curious as to how it is tabulated and constructed.

I totally disagree with your statement that the federal government created the American middle class. While there may be isolated cases where federal involvement allows individuals to move up, virtually every case of them becoming involved in personal finances ruins the upward movement of a person. Look at all the people on welfare, the vast majority of them will stay on welfare, their children will be on welfare and stay on welfare. They have no motivation to go out and better themselves because the government will take care of them. That is sad.

[Lonnie]

Here is the list of the 10 richest people in America:

1. William H. Gates
2. Warren E. Buffett
3. Paul G. Allen
4. Michael Dell
5. Lawrence Ellison
6. Christy Walton
7. Jim C. Walton
8. S. Robson Walton
9. Alice L. Walton
10. Helen R. Walton

Now these people are only one or two generations away from middle-class to lower-middle class roots.

Please tell me how that is not opportunity... Yes they are all white, but I can point to Oprah and Arte Moreno for other examples. Please don't forget that Indians are the most well to do ethnicity in this country.

Please tell me about another country that has this type of opportunity... ANY other country (besides maybe Hong Kong) :)

People who complain about opportunity in this country have their head up their posterior orifice.

[RationalSean]

http://www.cbpp.org/1-29-06tax.htm

Lonnie, showing data that proves successful entrepreneurs make a lot of money is like saying the sky is blue - it is true, obvious and has absolutely nothing to do with income inequality. The fact remains that the vast majority of citizens will never own or start a business; they are wage earners.

[seeker]

How on Earth can you seriously argue that the rich are somehow "harder working" than the rest of us?

Well, the general principle holds, wealth comes from having a good infrastructure that rewards hard work, and hard work. And if you inherited it, somoene worked hard in your past to give it to you.

Now some riches are gained through negative means (deceit, usury, slavery), but the virtues of persistence, honesty and hard work are still how most poor people raise themselves up out of poverty. My grandfather was a first generation American, and was so poor he didn't have shoes until he was 9 years old. He put himself through college (the first in our family), and worked two jobs all of his life to save for his children's and his grandchildren's college educations. I am not in the middle class because I am white (despite whatever advantages that gives me), but because my grandfather (who had to anglicize his name to get a job, btw) worked hard.

We should not reward laziness, nor penalize effort, and I think that the graduated tax penalizes effort. Not all poor people are lazy, but most lazy people are poor unless they've been handed riches by someone in their past who was hard working.

Also, if you read the biographies of many highly successful people, you'll find that they often sacrificed much and "burned the midnight oil" while others were not so dedicated. Despite the people who somehow lucked out and got rich, they are more exceptions, while the majority toiled to get where they are. The reality is really captured in such aphorisms as "chance favors the prepared" and "laziness will clothe a man in rags."

[seeker]

Sean brings up a good point - should we differentially tax passive (investment) income than we do salary from personal time and effort? That's not a bad idea, but I still think that the liberal approach of describing straight across the board percentage tax cuts as "favoring the rich" is deceptive and wrong.

[Lonnie]

Sean, way to pick an unbiased source

The Center conducts research and analysis to inform public debates over proposed budget and tax policies and to help ensure that the needs of low-income families and individuals are considered in these debates. We also develop policy options to alleviate poverty, particularly among working families.

Of course a poverty-advocacy lobbyist group is going to find some numbers to support the idea that the sky is falling and "oh, gee whiz, we can't get ahead 'cause The Man in on our back." B.S.! Plain and simple.

Where is opportunity better? One of the socialist Scandanavian or European countries that are edging toward financial ruin? Take a look at France and where their socialist tendencies have gotten them.

The fact remains that the vast majority of citizens will never own or start a business; they are wage earners.

OK, so it is who's lack of initiative that is affecting one's earning potential? Nowhere do people have more opportunity for owning their own business and cheap captial than here, if they so choose.

What exactly should I do for someone who won't try to better himself to benefit himself. Should I do it FOR him because I am smarter and richer than he is? Perhaps I should just give it to him, because he doesn't have it?

You first... let me know how that works out for you... er, him.

Finally, I outright reject the idea that the Federal Government must redistribute wealth because it comes with the idea that we as individuals cannot change our station in life.

[RationalSean]

Hmm..a couple of things.

(1) You condemn CBPP just because it advocates for low-income people. If you read some more before your libetarian ideological blinders kicked in, you might have noticed that the article was based on data from the Congressional Budget Office. CBPP's positions are based on facts, not faith; they don't need to lie.

(2) Where is opportunity better? Hmm...for an enterprising and educated immigrant - probably the US. For the average joe who wants a good life - well, 7 of the 9 countries ranked above the US in terms of livability are welfare states - see http://www.infoplease.com/ipa/A0778562.html

(3) As a matter of fact, I'm happy to pay my taxes. All of them - including social security, which I can't collect. I think of it as the price to pay to live in a civilized society. Nothing in life is free - the "free" market wouldn't exist without government intervention to create it. You don't find a free market growing by itself in some African savannah or Amazonian jungle.

[seeker]

RT (Rational Sean):

1. Just because the CBPP uses "reliable" numbers from the CBO doesn't mean that their selection of data and interpretation are not suspect.

2. Just because welfare states are "more livable" currently doesn't mean that they are sustainable. Sure, who wouldn't want to live in a country where the state does half of your work for you? But these models are proving to be UNSUSTAINABLE economically.

As a matter of fact, I'm happy to pay my taxes. All of them - including social security, which I can't collect. I think of it as the price to pay to live in a civilized society.

I think we agree on the fact that some taxes are necessary for a civilized society. But let's not cloak our governmental abuse of resources in good intentions. Your statement amounts to "I'm happy to be getting robbed because it's all for the good of others." It sounds noble, but applied without discernment, it's really naive sentiment that overlooks the true inequity of a tax system gone mad.

I'm not happy about getting fleeced for programs that are poorly conceived, poorly run, and based on principles (or lack of principles) that lead to dependence and irresponsible living. I'm NOT happy to be taxed for something that is supposed to benefit me, but won't because somebody tapped the till to pay for defense spending. I'm NOT happy that my money is being used to fund anti-american pro-communist propoganda films and offensive paintings in the name of art (they can make them all they want, but not on my dime.)

We're not arguing for a totally "free market" where there is not govt help for the poor (well, maybe libertarians are ;). We're arguing for limited govt that rewards virtue (hard work, personal reponsibility, investment, generosity, marital fidelity) while discouraging lack of virtue (laziness, dependence, promiscuity, personal debt).

The graduated tax, I believe, is penalizing success. We can make a fairer tax system while still accomodating care for the poor. I hate these liberal schemes for "social justice" that are really just another injustice - two wrongs don't make a right.

Another such scheme (besides the graduated tax) is the use of affirmative action quotas, which are really just reverse discrimination. I agree on the problem that we should address (institutional racism and lack of opportunity), but the solution here is just wrong - the ends do not justify the means. I'd say the same applies to the more extreme social welfare model.