Secrets and Tax Lies II

[This is a continuation of USWest's post "Secrets and Tax Lies" (4/27/06). I needed to make a separate post so I could include a chart.]

Few things anger me more than deliberate misuse of statistics, and there were some real whoppers in the NPR Marketplace Report from WSJ editorial board member Steve Moore. (Incidentally, since when does a respectable news outlet get to interview editorial staff at another news outlet and then reclassify the resulting opinion piece as news?)

Mr. Moore said that the share of taxes paid by the rich was rising and had risen during Bush's presidency. Dubious, I went to the the IRS directly and found the actual tax data Mr. Moore had referred to, then put together some annotated charts (please click on the charts to enlarge them).



First, note that Mr. Moore conveniently made his comparisons of present day to 2001, not 2000 (the last year before the Bush tax cuts.) Had he made an honest comparison to 2000, we would see a clear drop in tax share for the rich during Bush's term in office. So Mr. Moore lied about the effect of the Bush tax cuts.

Second, one can see that the tax share of the wealthy has been rising (in general) for about 20 years... but this is not, as Mr. Moore claims, because of disproportionate tax hikes on the rich. Instead it is because of their disproportionate gains in income! Look at how neatly the income statistics below track the tax statistics above:



Third, Mr. Moore neglected corporate income tax, predominantly paid by the upper percentiles. From 2000 to 2002 (the most recent year for which the IRS gives corporate data), a combination of economic factors and Bush tax cuts reduced the total tax collected from all individual income tax returns by 18%, while during the same time, the total tax collected from all corporate income tax returns was reduced by 25%! So once again, Mr. Moore conveniently forgot to mention the extra large tax cut that the wealthy enjoyed via the corporate tax cuts.

Finally, these taxes do not simply fall into a black hole, as right-wingers would have you believe. The government spends this money and in so doing returns it to people of various income levels. And as USWest and others have pointed out, the Bush years have shifted these expenditures away from the the lower 90% by cutting services, etc. The point is, if you slice the pie honestly, the Bush tax cuts were a windfall for the rich in several ways, and even the underlying trend toward increasing high-end tax share merely reflects growing income inequality.

[Sources: "Selected Ascending Cumulative Percentiles of Returns Based on Income Size Using the Definition of AGI for Each Year." Published as: SOI Bulletin article - Individual Income Tax Rates and Tax Shares, Tables 5 and 6. And "Size and Accumulated Size of Adjusted Gross Income." Published as: "Individual Complete Report (Publication 1304), Table 1.1" Both available here. Also "SOI Tax Stats - Corporation Data by Size." Available here. ]