Wednesday, November 18, 2009

Misusing Statistics - Distorting Tax Statistics

Look, I'm a fiscal conservative.  I hate the idea of solving all of our problems by taxing the rich.  I admit that I would normally spout a statistic like I quoted yesterday such as "the top 3.5% of earners pay over 60% of the tax dollars," to illustrate the iniquities in the tax code.    Unfortunately, there's a big problem with that stat  - it's a red herring designed to misdirect the reader, and I'm shocked that every time it's mentioned people don't shoot it down.  I am ashamed to admit that, despite my math background and statistical prowess, it wasn't until AsphaltJesus's comment yeterday on my post that I realized how inane/insane that stat is.

The point is that we need to know what percentage of the income the top 3.5% of earners earns!  If they earn 60% of the income, and pay 60% of the taxes, well then, that seems pretty darn fair.  According to,  the top 5% of earners earn roughly 37% of the income and pay roughly 60% of the taxes.   So, phrasing it as "the top 5% of earners pay 60% of the taxes," while comparing apples to oranges, sounds a lot more "unfair" to the wealthy than "the group that earns 37% of the income pays roughly 60% of the taxes."

Yeah, of course the rich still pay a higher relative share of the tax pool, but it's not quite as absurd as misleading or irrelevant statistics can make it seem.



Mike K said...

Does the 60% figure include all Federal taxes, like payroll or is it limited to just the income tax portion? I was under the impression that for the vast majority of income earners at the lower end of the distribution, payroll taxes take a much bigger bite compared to income tax.

Anonymous said...


Why, because any exclusions will promptly be gamed. The fact is that:

monied interests will get "THEIR" paid & bought congress person whore to introduce some exception that benefits them. That's the reality of modern day U.S. Government. From Obama on down....all bought by wealthy interests.

Don't believe that? Then spend 10 minutes on Google and educate yourself on who Obamas major campaign contributors were versus who has benefited most during his brief tenure.

Obama needs to go. Let's make him the last of the oligarchy puppets.


Abolish the FED! It's the primary tool of the ultra wealthy to keep their grip on power

Kid Dynamite said...

@Mike - i'm not sure exactly what's included in the figures - they are inexact for sure. I think your point is that if you include other taxes, it levels the playing field even more (since things like SS tax have a cap on them)

Anonymous said...

The whole concept of taxing income is the wrong tact. If you want to get the "rich" to pay their "fair share" you should tax accumulated wealth ex a capped retirement savings, NOT income. You could be worth $100mm all invested in muni's and essentially pay no income tax, meanwhile the couple earning $250K is paying close to a 50% marginal rate w/ state taxes.

Kid Dynamite said...

@Anon - i don't really want to argue about what i think is the proper tax strategy, although i will say that i disagree with you on this. That $100MM in muni's i have has already been taxed - now it's invested in a tax free way (because the gov't wants to encourage investment in municipalities)

there's no reason for it to be taxed again.