Lies, Damn Lies, and Statistics


“Lies, Damn Lies, and Statistics”

Mark Twain (among others), attributed the above quote to British Prime Minister Benjamin Disraeli. Regardless, the evolving tax cut debate is filled with and fraught with misstatements.

In any tax cut discussion, the “rich” will always “benefit” simply because they pay the most in taxes.

Here is a recent summary from the Tax Foundation (taxfoundation.org) for the 2014 tax year, which is the most recent data released by the IRS:

The key takeaways are 1) the top 10% represented 47.2% of the adjusted gross income (bottom of page 1 of the tax return) yet paid 70.9% of the taxes, and 2) the tax rate on the top 10% ranged from 21.25% overall to 27.16% for the top 1%.

The fact that the amount of income tax paid increases with taxable income reflects the progressive orientation of the income tax code by design.

Note the income tax split points that show what income puts people in the various tax groups. $38,173 in adjusted gross income puts a taxpayer in the top 50%. That is approximately $18.35 an hour. So if a person makes just above the fanciful $15 per hour “minimum wage,” they may be in the top 50% tax group. Makes one wonder how many of the protesters out there would march for that honor.

There is no “fair” income tax burden. Wherever the tax bracket line is eventually drawn, there will be taxpayers who complain they will suffer immeasurably with an equal number (or more) of taxpayers who will feel relieved that they just dodged a bullet. The purpose of the tax cut is to allow people and companies to keep more of their own money. The theory is that they will spend and invest, thus creating economic growth. The current administration in Washington believes that we can get back to 3% and better economic growth. Growth means more jobs and better-paying jobs. The Politically Correct naysayers believe that the 2% growth the economy has wallowed in over the last eight years is all the government can deliver. To the Politically Correct, 2% growth is the new normal and will be the growth rate of the foreseeable future. My students are somewhat oblivious to the details as this argument swirls around them. But if you ask them, they (and their parents) are for more jobs and more opportunity. It is so inconvenient when the Political Incorrectness of tax cuts rears its beautiful head.


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