The Wall Street Journal has a poor story today reporting that “High-Earning Households Pay Growing Share of Taxes.”
The paper’s editorial page has long pushed this issue, notoriously referring to folks who pay no income taxes as “lucky duckies.” You know, lucky enough to be so poor that they don’t have to pay taxes. At least we got a comic strip out of that:
The Journal’s story would have you believe that the rich are shouldering almost all of the tax burden. But the federal income tax is just part of the overall tax burden, and the paper barely mentions that fact, while it conflates income taxes and overall federal taxes.
Here’s the lede:
As President Barack Obama pushes to raise income taxes on high earners, opponents are seizing on data that indicates these U.S. households already pay a large and growing share of taxes, even compared with high-tax European countries. And a new congressional study concludes that the percentage of U.S. households owing no federal income tax climbed to 51% for 2009.
It focuses on overall taxes in the first sentence and income taxes in the second. But even those in the poorest quintile pay payroll and excise taxes (and a net effective federal rate of 4 percent). When it “to be sures” that a few paragraphs down, the Journal makes it a “Democrats said” thing rather than a plain fact and the paper gives no numbers to back it up.
Senator Orrin Hatch sets the tone for the story, getting the third paragraph to himself:
“Most taxpayers are skeptical that the answer to our fiscal problems is for them to sacrifice more, when more than half of all households are not paying any income taxes and an increasingly smaller group of Americans is shouldering the burdens for an increasing larger group of Americans,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.
Which is followed by the to-be-sure graph that doesn’t cut it:
For their part, Democrats note that the incomes of higher earners have been growing far more rapidly, so it’s only natural that they would pay a higher share of tax. As for those Americans who pay no federal income tax, most of them still pay Social Security and Medicare payroll taxes that can take a significant share of their income, Democrats said.
The paper tosses that off but gives us no numbers on what the net federal tax burden for those lucky duckies in the 51 percent of folks not owing income tax. It’s an average 4 percent for the bottom quintile, 11 percent for those in the second, and 14 percent for those in the third.
Then there’s this:
A 2008 study by the Organization for Economic Cooperation and Development, for example, found that the highest-earning 10% of the U.S. population paid the largest share among 24 countries examined, even after adjusting for their relatively higher incomes. “Taxation is most progressively distributed in the United States,” the OECD study concluded.
It’s interesting that the paper flagged a three-year-old study. Where have I seen that quote before? Ah, yes. The Wall Street Journal editorial pages, cherry picking from an OECD report on how poverty and inequality is growing in OECD countries, particularly in the United States, whose poorest are quite a bit poorer than those of the average developed country. I’ll quote the OECD:
The United States is the country with the highest inequality level and poverty rate across the OECD, Mexico and Turkey excepted. Since 2000, income inequality has increased rapidly, continuing a long-term trend that goes back to the 1970s.
Rich households in America have been leaving both middle and poorer income groups behind. This has happened in many countries, but nowhere has this trend been so stark as in the United States. The average income of the richest 10% is US$93,000 US$ in purchasing power parities, the highest level in the OECD. However, the poorest 10% of the US citizens have an income of US$5,800 US$ per year - about 20% lower than the average for OECD countries.
Here’s another OECD quote that didn’t make it:
Tax-and-benefit systems are also redistributive in Korea and the United States, but to a much lesser degree