Last Friday, I wrote a short entry, “Economics: Dismal Science or Jive-Ass Trade?”, gratuitous in tone if not in substance, that took an unkind look at, among other things, an article in the Wall Street Journal by Andrew G. Biggs And Kent Smetters, which included the following statements:
“According to the Tax Policy Center, a joint venture between the Urban Institute and Brookings Institution, around 78% of the McCain tax cut would accrue to the top fifth of income earners, with almost 30% going to the highest 1%. This seems inequitable on its face, a point the Obama campaign and the press focus on.
But can we conclude that the rich would pay too little taxes under the McCain plan? Not really, because most media reports do not reveal the resulting share of the tax burden borne by the highest earners.
As it happens, the top fifth of earners currently pay 67% of all federal taxes — including not just income taxes, but payroll taxes, corporate taxes and death taxes. The top 1% of earners pay 26% of all federal taxes.
If the McCain proposal were passed, the top fifth would actually pay a greater share of total federal taxes and the top 1%’s share would decline by only 0.3%. In other words, high earners carry the vast majority of the federal tax burden and, despite what the media portrays as a shift from Scandinavian egalitarianism to Latin American inequity, would continue to do so under Mr. McCain’s plan.”
Biggs and Smetters also claimed that “All but the very lowest income Americans would face higher marginal tax rates under the Obama plan than the McCain proposal.”
Mr. Biggs responded quite politely to my tirade, and suggested that I try the Tax Policy Center’s website if I wanted more information. Well, I did, and what the TPC says doesn’t quite jibe with what Biggs and Smetters say.
According to the TPC, all five quintiles will show an increase in after-tax income under the Obama proposals—ranging from about 6% for the bottom quintile to about 2% for the top. For McCain, the increases run in reverse order—about 1% for the bottom quintile to over 6% for the top. The top 1% will lose about 1% of after-tax income under Obama’s proposals, while gaining close to 10% under McCain’s.
Perhaps Biggs and Smetters can explain why “the top fifth would actually pay a greater share of total federal taxes” under McCain’s plan even while their after-tax income would increase more than the lower four quintiles. And perhaps when they say that “All but the very lowest income Americans would face higher marginal tax rates under the Obama plan than the McCain proposal,” they simply mean that marginal tax rates would be higher under Obama than McCain. But, frankly, their article still strikes me as just a wee bit jive-ass.
Afterwords
Biggs and Smetters do not, of course, explain that the top quintile and top 1% pay so damn much taxes because they make so damn much money. That’s so damn irrelevant!
