WSJ Editoral

Max Sawicky sawicky at epinet.org
Tue Oct 10 09:16:24 PDT 2000


What WSJ is talking about is an income class's tax liability relative to the total, not their burden (taxes paid divided by income). The top 1 percent of income recipients have a high share of total tax liability. Their tax burden is another thing altogether. One's share of tax liability can go up while one's burden goes down, if one's income goes up more than one's liability.

" . . . We know that's hard to believe after the past week's worth of confusing data and silly arithmetic that started with Mr. Gore's charge that the Bush tax plan gives nearly half of the tax cut to the "wealthiest 1%." And it's also hard to believe that a total policy wonk like Mr. Gore could be so mistaken.

But the fact is that, according to the nonpartisan Joint Committee on Taxation (also cited approvingly by Mr. Gore), the top 1% will get about one-fifth--not "nearly half"--of the benefit under Mr. Bush's tax proposal.

Mr. Gore's mistake rests on two confusions. First, he confused the notion of wealth with the notion of income--two entirely different categories."

[mbs] This is true but common in conversation -- to refer to the top income recipients as the most wealthy. It doesn't change the numbers.

" . . .Second, Mr. Gore included estate taxes in his calculation. Estate taxes show up in the year that the heirs receive their bequest. Not only does that mean that many of them make the top 1% category for only one year, but the bequest itself is most usually the result of a lifetime of accumulation. For example, the heir of an estate could be earning $50,000 a year and receive, as a bequest, a house, farm, small business or Aunt Mopsie's collection of Impressionists."

[mbs] Since the receipt of an estate is income to the recipient, there is no errancy on Gore's part here. Every year, some handful of heirs gets an estate that puts them in the top ranks of income recipients. The fact that it's a different group each year makes no difference. If Aunt Mopsie works as a washerwomen for sixty years, saves like a demon, and is lucky in her investments, she can leave you enough to make you a very high income recipient, at least once.

. . . We doubt that these were honest mistakes. Mr. Gore was using figures generated by the left-leaning Citizens for Tax Justice, not figures provided by the source of choice, the IRS Statistics of Income Bulletin or data provided by the Joint Committee on Taxation. Indeed, we suspect that these were not mistakes at all, but part of Mr. Gore's unremitting rhetoric of class warfare."

[mbs] CTJ and JCT use the same kind of tax model. CTJ's model is well-regarded among the pros. You can't use SOI figures to simulate some tax proposal; you need a model.

" . . . But his rhetoric doesn't fit the facts. Mr. Bush's tax plan would result in a larger redistribution of the income tax burden: less burden for those earning under $100,000 and more burden for those earning over $200,000. Moreover, if one adds Mr. Bush's plan for a 2% cut in the payroll tax--obviously a bigger deal for the working dog--the result is more redistributive away from the rich than Mr. Gore's tax cut, and even more redistributive period."

[mbs] more conflation of tax share and tax burden. As for the 2 percent cut, WSJ's point depends on ignoring the replacement of the 2 percent cut when that cash will be needed to pay benefits (in less than 15 years).

Maybe this edit will persuade some stupid wealthy people to vote for Gore, since it makes the case for his plan being less redistributive than Bush's.

mbs



More information about the lbo-talk mailing list