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September 25, 2012

Numbers Game

The 1%. The 99%. 47% of taxpayers pay no federal income tax. Mitt Romney's effective tax rate is 14.1%. And close to 70% of Americans now get more out of the tax system than they pay into it:

The wealthiest 5 percent of Americans already account for 59 percent of federal income taxes. Nearly half of our citizens pay no federal income taxes at all—yet two-thirds of us believe that everybody should at least pay something, even if just to remind ourselves that government isn’t free. The Tax Foundation reports that the percentage of Americans who are net takers from the tax system is nearing 70 percent.

If our system is not yet “fair,” what will make it so? If the top 5 percent paid 75 percent of the total? Or 95 percent? If they could, would it be ideal for the top 1 percent to carry all the rest of us so we could finally have a tax code that is “fair and balanced”?

They key is to focus on a single number, preferably taken completely out of context. This makes it possible to write an entire article called "What I want you to you need to know about Romney's 2011 tax return" without once mentioning that Mitt Romney pays a higher tax rate than the vast majority of Americans:

Ask most Americans how much they pay in taxes, and they'll probably refer to their tax bracket, a series of rates that ranges from 10% to 35%. By that measure, Mitt Romney's tax rate sounds outrageously low.

But when the Republican presidential candidate revealed earlier this week that he pays about 15% in taxes, he was referring to his effective tax rate, not his tax bracket. And by that measure, he's paying a higher tax rate than the majority of taxpayers.

...The average effective federal tax rate for American taxpayers is 11%, according to an analysis of 2009 IRS data by the Tax Foundation, a non-profit research organization. For individuals with adjusted gross income of $50,000 or less, the average effective tax rate is less than 5%, according to the Tax Foundation.

This is basic stuff: knowing the difference between the highest tax rate paid on a small fraction of earned income over a certain threshold and the overall (effective) tax rate and the rate at which capital gains - which are different than earned income are taxed.

If the press can't even get something this simple right...

They say 3 percent of the people
use 5 to 6 percent of their brain
97 percent use 3 percent
and the rest goes down the drain
I'll never know which one I am
but I'll bet you my last dime
99 percent think with 3 percent
100 percent of the time

65 percent of all the world's statistics
are made up right there on the spot
82.4 percent of people believe 'em
whether they're accurate statistics or not

I don't know what you believe
but I do know there's no doubt
I need another double shot of something 90 proof
I got too much to think about

Too much to think about
Too much to figure out
Stuck between hope and doubt
It's too much to think about

They say 74 percent of everything you learned in college
is a bunch of bullsh** you'll never need
83.4 percent of everything you got
you bought to satisfy your greed
Because 91 percent of the world's population
links possessions to success
Even though 88 percent of the wealthiest 1 percent
of the population drinks to an alarming excess
More money, more stress

It's too much to think about
Too much to figure out
Stuck between hope and doubt
It's too much to think about

74 percent of all statisticians truly hate their f**kin' job
The average bank robber lives within, say
about 20 miles of the bank that he robs
There's this little bank not far from here
I've been watching for a while
Lately all I can think about's
how bad I wanna go out in style

The Blog Princess once worked a snippet of these lyrics into a conference presentation. It was one of the proudest achievements of her professional life.

Posted by Cassandra at September 25, 2012 08:32 AM

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Butbutbutbut...wasn't it the LSM who alerted Mericans to the fact that the tax code was complex and wordy?

Posted by: La Femme Crickita at September 25, 2012 10:17 AM

It is very hard to define exactly who is a "net taker." For example, is the guy who runs GE's wind energy business a net taker? He doesn't receive any tax money directly, and I'm sure he's a very hard and competent worker, but his job is pretty dependent on subsidies to the wind industry.

Posted by: david foster at September 25, 2012 10:50 AM

That's a good point, David. I was only referring to federal income tax.

The interesting question is: how do American firms compete globally with foreign firms who are subsidized by their governments, while paying higher wages and offering better benefits than most of the rest of the world?

This is why I resist simplistic formulas either way.

Posted by: Cass at September 25, 2012 11:14 AM

"This is why I resist simplistic formulas either way."

Resistance is futile.
These are not the numbers you're looking for.
Move along.

Posted by: Evil Twin at September 25, 2012 01:03 PM

It can be hard to say who a "net taker" is in another way, too. Some of the jobs done by government actually do increase the productivity of the economy, as for example by providing roads, or security, or the possibility of contract enforcement. It's hard to say that a contract court is "taking" from the economy because even though the costs of maintaining the court are largely paid for by taxes, the benefits outweigh the costs.

Posted by: Grim at September 25, 2012 01:45 PM

I don't think talking about takers or makers really makes much sense, except in relation to federal income taxes paid.

Payroll taxes are really irrelevant because (at least in theory) you and your firm are paying into your own retirement fund.

Limited to federal income tax, we're talking about money that goes into a huge pot that funds government services. There's no guarantee that every person will benefit from every service, but at least in theory, these are the things our Congressional Overlords have decided - on our behalf, because none of us wants to read legislation or sit in on Congressional hearings - that government should be doing.

Conservatives mostly believe that the proper role of government is only to do things individuals and families cannot do for themselves: so, government builds roads and bridges, there are courts to decide disputes and a military to defend the nation. Not all citizens agree on what's necessary and proper - there are lots of folks who don't think we need a standing military, and lots who don't think government should be redistributing income.

Most of us, regardless of party affiliation, believe there should be some kind of safety net for those times when individuals truly can't provide for themselves. The problem is, the safety net long ago stopped limiting itself to those situations and expanded to cover things that are "hard" or inconvenient or tried to redress perceived injustices, whether historical, economical, pastoral, comical, or tragical, for various favored groups.

David Brooks has a good column up today. I don't always agree with him, but he's got a point.

Posted by: Pachysandra at September 25, 2012 02:02 PM

Posted by: spd rdr at September 25, 2012 02:56 PM


Even a wholly sister needs a good laugh now and then.

Posted by: Sister Mary Bag O' Metaphors at September 25, 2012 03:28 PM

By the way, my favorite of Snider's song is this one. But maybe we've talked about that before.

Posted by: Grim at September 26, 2012 12:52 AM