7/15/2009

WaPo Lies about the Rich and Taxes

Today the Washington Post ran an editorial that had a lede ('The Deep-Pockets Mirage: House Democrats would have us believe that the rich can pay for it all') that would make you believe that it might opine against higher taxes, but in the end it was the same old call for a "more progressive" tax system. In other words...tax the rich.
THERE IS a serious case to be made that the U.S. income tax system should become more progressive. The average rate paid by the top 1 percent of households shrank from 33 percent in 1986 to about 23 percent in 2006. At the same time, the share of adjusted gross income claimed by that highest-earning sliver of American society doubled, from 11 percent to 22 percent. So, in principle, higher taxes for the well-heeled could make sense -- as part of a broader rationalization of the unduly complex tax code.
Now, I don't mind if newspapers hold opinions about the way our country is run (as long as they keep them confined to the Editorials like this one), but why do they have to use wholly incorrect and unattributed numbers to try to make their point??

In the citation above, WaPo say that the tax rate paid by the 'Top 1%' shrank from 33% to 23% between 1986 and 2006. And they also state that during the same time period, the share of gross income for the same people doubled from 11% to 22%.

However, these numbers do not match up with those recently published by the Congressional Budget Office (Hat Tip: Heritage Foundation). Given that the WaPo doesn't cite any source for their numbers, it is hard truly judge, but I don't think I am willing to give them the benefit of the doubt.

In their report, 'Data on the Distribution of Federal Taxes and Household Income', the CBO's numbers show the following:

- Between 1986 and 2006 the 'Effective Tax Rate' on the Top 1% rose from 25.5% to 31.2%...a 22% increase, rather than the 31% decrease that WaPo claims.

- Between 1986 and 2006 the 'Average Household Income' of the Top 1% did rise from $880k to $1.75mil (a doubling), but the 'Share of Income' rose from 14% to 18.8%...a 34% increase vice the 100% that the WaPo suggests.

Now, before digging into the numbers, I had intended to simply point out how the WaPo had conveniently ignored the total amount of the tax pie that the Top 1% and Top Quintile actually pay.

Since the WaPo seems to want to suggest that since the mid-80s that the rich have gotten richer and also paid less taxes at the same time, lets stick with that same time frame.

The CBO's numbers also show the following about who really shoulders the burden of the tax system:

- Between 1986 and 2006 the 'Share of Total Federal Tax Liabilities' paid by the Top 1% increased from 17.1% to 28.3%...an increase of 65.5%

- Between 1986 and 2006 the 'Share of Total Federal Tax Liabilities' paid by the Top Quintile increased from 57.5% to 69.3%...a 20.5% increase

So what we can see here is that, yes, the rich have gotten richer, but they have also already paid more and more taxes. In fact the share of taxes for every Quintile except the "Rich" has decreased, even though every Quintile has seen its average income rise....

Ultimately we already have a very progressive tax system, and it keps on getting more progressive. The fact that the WaPo wants to make it even more so means that it probably won't be happy until the
'Share of Total Federal Tax Liabilities' on the Top Quintile is 100%.

Methinks a lot of that Quintile will begin hanging out in a hidden valley with John Galt.....