Nobody From Nowhere (@i8dc)

Occasional Common Sense

Ph.D. Economist, Class Warfare, and Warren Buffett – Part One of Two

with 3 comments

or “Mark Perry’s Dishonest, Lazy, and/or Thoughtless Chart” *

Mark Perry’s at it again over at his Carpe Diem blog, back again with the Warren Buffett thing.  But he starts off a column nominally about Warren Buffett with this chart of various effective tax rates:

Here’s what I dislike about this chart:  it’s dishonest and/or lazy.

I don’t think it’s thoughtless, as Perry takes the time to derive the bottom 50% number, which isn’t broken out in his source, but leaves the rest of the data as it was presented rather than breaking out the income steps (percentiles 50-75, 75-90, 90-95, 95-99).  There are two ways to present this data honestly: either replace the “Bottom 50%” column with an “All” column (which would be 11.06%, but wouldn’t tell the story Perry wants to tell), or else break out all the levels; 0-50, 50-75, 75-90, 90-95, 95-99, and 99-100.  Instead, Perry chooses to have all of the income levels over 50% inflated by the top end of the scale.

Class warfare, anyone?  Really, is there any other way to describe what he’s done here?

Here’s how the data should have been presented:

Compare this chart with the one above.  It shows a few things:

  1. There is no dramatic step in the tax code; it’s not like the 53rd percentile pays much in taxes.
  2. The income tax rate at the high end is much higher than it is on the middle class.
  3. Income taxes aren’t nearly as high on the middle class as many people in the middle class seem to think.

Then Perry continues the Quixotic campaign against Warren Buffett.  That’ll have to wait a little while.

 

Update, October 13:  Here’s Part 2.

Mark Perry brought to my attention that my secondary heading to this was inappropriately insulting, so I’ve slightly modified it so that it’s now appropriately insulting.

Written by David Clayton

October 12, 2011 at 10:53 pm

Posted in Debunkery

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  1. What is misleading, lazy, dishonest – however you want to call it – is top present only income tax rates while omitting payroll taxes, which of course are highly regressive. Your claim 2 – The income tax rate at the high end is much higher than it is on the middle class – is not accurate. Claim 3 – you have a point. Americans complain way more about taxes than is justified by the numbers. But when you include all taxes – payroll, state, sales, etc. – the numbers don’t look as tiny as you make them. And accounting for all taxes, the American tax system is hardly progressive at all. See http://voices.washingtonpost.com/ezra-klein/2010/04/do_the_poor_really_pay_no_taxe.html, http://arkansasmediawatch.wordpress.com/2011/07/27/reagan-deficit-spending/

    arkansasmediawatch

    October 14, 2011 at 7:25 pm

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  2. Nothing dishonest about presenting just income tax, as long as you present it fairly and don’t claim that it shows something about overall taxation that it doesn’t show.

    As for my claim that income tax rate is much higher at the high end than on the middle class – I stand by that. Let’s say the that 50th-75th percentile range represents a big chunk of the middle class. The average tax rate is 5.6%. The average rate more than doubles in the 90th-95th percentile, and goes up from there (until you get into the top 1%, where it reverses, but nothing up there is less than 3x that 5.6% rate). So I’m comfortable saying that the income tax rate is higher — but as we both know that’s not the whole story.

    I took a quick look at the link in Ezra’s post (http://www.ctj.org/pdf/taxday2009.pdf), and while I’m guessing the report’s pretty fair, I’d like to see more data. And 2009 was a very strange year. So I pulled up the 2010 and 2011 reports and did a little figuring.

    Below are each group’s share of all taxes paid divided by income share, averaged across the three years. I don’t think it’s representative, because of the extraordinary economy we’ve had these three years, but I didn’t find older comparable data.

    2009-2011
    Slice } tax share/income share
    0 -20 | 58.0%
    20-40 | 72.8%
    40-60 | 89.2%
    60-80 | 100.2%
    80-90 | 105.9%
    90-95 | 109.2%
    95-99 | 110.1%
    99. + | 105.9%

    I’d like to see how this compares to how progressive the system was at various times in the past. That would be more informative. But as it is, this is more evidence that progressivity flips at the very top.

    David Clayton

    October 14, 2011 at 9:27 pm

    Reply

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