Associated Press Pushes False "fact check" of President Obama's statements on Buffett Rule
The conservative media have echoed the criticisms made by a misleading Associated Press "fact check" of President Obama's statements about taxation and the Buffett Rule he has been promoting. Progressive economists have rebutted the AP's criticisms and lent support to his proposals.
AP: Millionaires Already Taxed More Than Their Secretaries
AP: "The Data Say" Millionaires "Are Already Taxed At Higher Rates Than Their Secretaries." From an Associated Press "fact check" by Stephen Ohlemacher:
President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are.
"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said as he announced his deficit-reduction plan this week. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."
On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office. [Associated Press, 9/20/11]
Progressive Economists Back The Buffett Rule, Refute AP
Krugman: "The Obama/Buffett Claim Is Absolutely, Totally True." From Nobel laureate Paul Krugman's New York Times blog:
Well, it seems as if a number of people in the media have decided that Obama was fibbing when he said that some millionaires pay lower tax rates than their secretaries -- because, as the usual suspects triumphantly declare, on average millionaires pay higher average taxes than middle-income Americans.
This is, of course, stupid: the operative word is SOME.
And we're not talking about one or two exceptional guys, either. Look at the IRS data on returns for the 400 highest incomes in America (pdf) -- specifically, Table 3. If you look at the numbers since 2004, you'll see that in a typical year between 30 and 40 percent of those super-high-income players paid an average tax rate of less than 15 percent; most of them paid less than 20 percent. Bear in mind that for the very wealthy the payroll tax -- the main burden on working-class Americans -- is trivial, because of the cap on Social Security and the fact that it only applies to earned income. And what becomes clear is that the Obama/Buffet claim is absolutely, totally true.
So why the attack? Probably because it's such an effective line. And we can't have populism that actually strikes a chord with the public, can we? [The Conscience of a Liberal, The New York Times, 9/21/11]
CEPR's Dean Baker: Obama "Made A Simple And True Statement In His Speech On The Budget." From Dean Baker, co-director of the Center for Economic and Policy Research:
President Obama made a simple and true statement in his speech on the budget Monday. He said that there were millionaires and billionaires who pay tax at a lower rate than middle income families.
Many news outlets went to town to point out that on average millionaires and billionaires pay tax at a higher rate than middle income families. Of course this is not what Obama said. He was pointing out that some of the richest people in the country (Warren Buffet was his model), get most or all of their income as capital gains and therefore only pay taxes at the 15 percent capital gains rate.
The NYT gets this right today. Other outlets could have saved a lot of trees and better served their readers if they didn't work so hard trying to refute something that President Obama did not say. [Beat the Press, Center for Economic and Policy Research, 9/21/11]
Jared Bernstein: Buffett Rule Is A "Principle," A "Guideline For Tax Reform." From Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities:
Actually, let's look at this principle for a moment, for "principle" it is--in fact, it doesn't factor at all in the $1.5 trillion in revenue raised in the President's budget plan. The administration laid it out as a guideline for tax reform, a kind of tripwire in the tax code to avoid the problem identified by billionaire Warren Buffet: because much of his income gets special treatment in the tax code, he faces a smaller effective tax rate than many in the middle class.
[...]
Now, it's not the case that every millionaire pays a smaller share in taxes compared to middle class families. But, as my colleague Chuck Marr points out on the CBPP blog, if much of their income derives from non-labor earnings, like capital gains and dividend payouts from their equities, then they likely do pay less as a share of their income.
And in fact, Chuck features a graph showing that the effective tax rate (taxes paid as a share of income) on income and payroll taxes are about 15% for a middle-class family with mostly earned income, compared to 12% for a millionaire (or higher) household with at least 2/3 investment income.
Here's another look at the same data from the Tax Policy Center. This figure shows the effective tax by share of investment income. The effective rate drops by half going from left (more labor income) to right (more capital income).
Source: Tax Policy Center, link above.
Is there a rationale for such favorable, and potentially distortionary, tax treatment? As noted here, I don't see it, and the research is supportive of that view. It's just another loophole (and another victory for the winning side in the class war, but that's another issue...) [On the Economy, 9/20/11]
CBPP's Tax Policy Director Chuck Marr: "A Significant Group Of Very Wealthy People Pay A Smaller Share Of Their Incomes In Federal Income And Payroll Taxes Than Large Swaths Of The Middle Class." From Off The Charts, a blog of the Center on Budget and Policy Priorities
Funny how conservatives suddenly decide, when convenient, that facts matter. They have lied, distorted and told half truths for fifty years to manipulate the American public into voting against their own best interests. Now that they have left president Obama with few tools to fix the economy they broke, they're lying in their tactics to once again avoid responsibility for keeping millions of Americans unemployed. Keeping Americans unemployed is their major campaign theme heading into 2012. They figure the worse the economy, the more they can shift blame.
