Reuters Duped by Mitch McConnell
Jeremy Pelofsky and Richard Cowan report for Reuters that “Some Republicans, including Minority Leader Mitch McConnell of Kentucky, have pushed for cutting the 25 percent middle-class tax rate as a way to get money into the hands of Americans quickly.” But of course conservatives always say they want to help the middle class, but they always mean they want to help multi-millionaires. And as we had occasion to observe yesterday, this proposal is no exception:
Organizations like the Tax Policy Center and our own operation here at CAPAF exist precisely in order to do this kind of analysis. Meanwhile, I think the fact that politicians sometimes try to mislead people is pretty well-known. It seems to me that political reporters would be well-advised to try to check with some tax analysts before uncritically accepting assertions from the likes of McConnell.
39 Responses to “Reuters Duped by Mitch McConnell”
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January 9th, 2009 at 10:34 am
Even a real middle-class tax cut is a stupid idea though, no matter how much time Obama spent campaigning on it. Anybody can see that people will save it and/or pay down debt. No stimulus there. Nobody non-rich is buying anything they don’t absolutely need right now.
Public investment that directly puts people on payrolls is the only thing that will help. (And God knows we have decades of infrastructure neglect to make up for, so there’s no question that it can be highly productive i.e it will pave the way for faster growth when we finally recover.) It’s time to ignore insane Republicans instead of attempting the impossible task of mollifying them.
January 9th, 2009 at 10:56 am
I am shocked at how insensitive MattY is for the needs and feelings of the mere deci-millionaires, who are really beginning to feel the heat compared to the centi-millionaires and billionaires.
January 9th, 2009 at 11:11 am
I’d like to see an identical chart for the average amount of income taxes each of these groups pay.
January 9th, 2009 at 11:30 am
Matt really should know better than to post this kind of semi-informative chart.
A couple of bullet points would help. Like how many (really, what percentage) U.S. households pay any income tax at the 25% rate. Not very many. I know I don’t, and I make double the national income average.
January 9th, 2009 at 11:47 am
It seems to me that the chart is not quite apposite, since it shows how much money a single average household in the different brackets would receive. There are many more people in the lower brackets than in the higher brackets, so if you instead graphed the amount of money that would go in the aggregate to taxpayers in each bracket, I suspect the graph would tend to support McConnell’s point much better. Why isn’t that the right analysis? I say this as no particular fan of Reuters or (especially) McConnell.
January 9th, 2009 at 11:49 am
For Republicans, multimillionaires ARE the middle class.
January 9th, 2009 at 12:01 pm
Al,
Depending on filing status, for those who make more than the top of the 25% bracket, between (roughly) $35,000 and $70,000 dollars are taxed at the 25% rate. Cutting that to 15% saves them $3500 to $7000 dollars.
Most people don’t pay any tax at the 25% rate. Average taxable inividual earnings are right around $30,000/year. The 25% rate kicks in around $35,000 for individuals and around $70,000 for couples. McConnells plan is the “wealthier than average” tax cut.
What I’d like to know is how someone making $600,000 saves only $2600?
January 9th, 2009 at 12:11 pm
DTM, we probably don’t really disagree. If you go far enough down the ladder to the people who will need to spend the money on necessities, it will help and I’m for it. But I’m not terrifically well off (perfectly OK though), and I shouldn’t be getting any of the money- I’ll just save it.
January 9th, 2009 at 12:17 pm
I did some quick checking, and as of the Bush tax cut, about 75% of Americans lived in households that paid at the 15% bracket or lower. About 20% paid in the 25% bracket. About 5% paid in the upper bracket. Within those who pay at the 25% rate, the distribution is skewed towards the lower end – they pay very little tax at the 25% rate.
That means that the 2 big spikes you see are 5% of the population. The little nubs you see are 20% of the population. The empty area is 75% of the population.
January 9th, 2009 at 1:00 pm
Speaking of McConnell and bald-faced fibs, I heard him this morning on NPR repeat the old “Republicans represent 50% of the U.S. population” canard. As MY pointed out earlier, the number is more like 37%.
January 9th, 2009 at 1:03 pm
If 30.5% of the benefits are going to households with incomes over $110,000, that still seems badly mistargeted.
I still would like an explanation of how the numbers used to construct the chart were arrived at. It makes no sense to me that the amounts in the middle can be so low. How can households with incomes in the $160,000-$600,000 range, for example, have such a small proportion of their income in the 25% tax bracket?
January 9th, 2009 at 1:03 pm
Maybe you last two words signify why the difference. Maybe those with over $2.8 mill in yearly income are more likely to be married then those with only $600,000 in yearly income.
January 9th, 2009 at 1:05 pm
This graph is a bit misleading, I think, because $6,000 is still a relatively smaller proportion of, say, $1.8m than $400 is of $75,000. On top of that, as someone pointed out, the total amount of money going towards people in the lower bracket would be at least comparable to the amount going to people in the higher bracket – there are just a lot more of the former.
Not that I support McConnell’s tax plan, but it seems the chart would be much more informative if the Y axis was the percentage of household income saved, instead of the total amount saved. The dramatic spike after $600,000 is largely the product of the incomes in those ranges being so much higher than on the other end.
January 9th, 2009 at 1:06 pm
Fnook, not only that, but McConnell also talked about the 60-vote requirement for passing anything as if it were a perfectly normal, tradition-hallowed part of the functioning of the Senate, rather than a result of the GOP’s radical change of filibustering from something to be reserved for expressions of serious outrage to something to be considered the equivalent of an ordinary “no” vote.
January 9th, 2009 at 1:08 pm
Why would that be? Once your income exceeds the top of the 25% bracket (which someone at $600,000 is well past), you’re getting the maximum savings of $6,000 or whatever, so having a higher income wouldn’t result in any more.
January 9th, 2009 at 1:15 pm
To add to that, the drops in the 160k-225k range and 225k-600k ranges suggest to me that there is an element of truth to McConnell’s claim. Proportionately, those cuts are much, much smaller than than the cuts below 110k. There’s no way to tell, using this graph, why it jumps so much after 600k. 600k-2.8m is an enormous range, and of course, if you push the upper bound of your range high enough, the sheer size of the numbers you’re dealing with is going to drag the total amount saved upwards. If anything, I’d expect the total amount saved in the “everything higher than 2.8m” category to be even higher, because you’re dealing with such extreme incomes.
Again, McConnell’s tax cut may or may not be for the middle class – but you certainly can’t say it isn’t just by looking at this.
January 9th, 2009 at 1:22 pm
How’s that? Once you’ve passed the top of the 25% tax bracket, there is no additional savings. How would the amount saved be dragged upwards?
January 9th, 2009 at 1:25 pm
Well, as someone pointed out, the graph is confusing in that regard. If everyone over 600k was receiving the same tax cut, the final two brackets should be identical. I don’t know why they aren’t, but it’s not difficult to explain why the graph looks the way it does without resorting to “Mitch McConnell lied.”
January 9th, 2009 at 1:51 pm
Or that MY and whoever made the graph lied.
January 9th, 2009 at 2:18 pm
I think capital gains would explain some of it. If you earned $50,000 of taxable income, and $500,000 of capital gains, you would not be in the top tax bracket. The plot above does not distinguish between the type of income, but the tax brackets do.
January 9th, 2009 at 2:43 pm
That’s definitely a better explanation than “Rich people are more likely to be married,” although we really shouldn’t have to be doing interpretative readings of a graph like this. If the facts are as clearly against McConnell as Matt suggests, there’s got to be a simpler, more accurate way of showing it.
January 9th, 2009 at 3:25 pm
It’s the Alternative Minimum Tax. This tax proposal saves $7000 for all couples (filing jointly) who make more than $130,000 who DO NOT pay the AMT, and who won’t pay the AMT even when they get $7000 lower taxes. It saves $0.00 for anybody who does pay the AMT.
Now, virtually everybody who makes between $100,000 and $500,000 will pay the AMT in 2010 (and I would guess many who don’t are probably only a few hundred dollars away from paying it, so this change will only save them these few hundred dollars). So it saves people in this range very little money.
The people in lower brackets don’t pay the AMT, but they aren’t that far into the 25% tax bracket, if they are at all, so they don’t get much savings either.
When you get up to several million dollars, relatively few taxpayers in this bracket pay the AMT, so these are the people who get the full benefit of this change.
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