Zombie tax lies

Paul Krugman repeats a porkie.

The claim that only rich people pay taxes is a zombie lie — something that keeps coming back no matter how many times it’s killed by evidence.

He replicates a fascinating graph. The data are here.

It certainly looks like middle income earners are paying just as much tax as high income earners – in fact it looks like some of ‘the rich’ are not paying their ‘fair’ share at all. But look again – look carefully at the x-axis. The data are shown in 20 percent slices, then 10 percent, 5 percent, 4 percent and finally one percent. The graph is not comparing like with like. This is what it should look like.

As Krugman says,

They are deliberately trying to deceive you.

Yes, indeed.

(HT: Nick Gruen)

Update: Here is the evidence for the rich paying the bulk of US income tax.

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39 Responses to Zombie tax lies

  1. Krugmanhas been systemically economical with the truth on all issues since he joined the NYT about 10 years ago. Even his own graph shows that higher income recipients pay a higher porportion of tax than their share of total income.

    Nick Gruen’s data totally confirm the serial duplicity of Krugman on all issues since 2000.

  2. JC.

    This is amazingly dishonest even from the Krug.

    I’m thinking that Robin wrote it, as the Krug is at least an accomplished liar.

  3. Abu Chowdah

    Unbelievable. What a liar.

  4. PSC

    Given the prominent placement of the text: “Share of Total Taxes Paid By Each Income Group Were Similar To Their Shares of Total Income in 2010”, one might think the point of the graph was that the share of total taxes paid by each income group were similar to their shares of total income in 2010.

    To me this implies that the graph is trying to compare the share of total taxes paid with the share of total income. Not that “middle income earners are paying just as much tax as high income earners”.

    Perhaps a less deceptive presentation all-round would be just to scale all groups income to 100.

  5. JC.

    PSC

    Stop it with the bullshit equivocations. Here let me present it to you this way.

    bottom 20% pay 2%
    Second 20% pay 5%
    Middle 20% pay 20%
    Top 20% of
    Income earners
    Pay 65%

    That’s not what the lying douchebag (the Krug) showed in his dishonest chart.

    In other words US taxes are highly progressive.

    Seriously everything the Krug touches ends up always being dishonest. It’s like his was born to lie and deceive.

    You once mentioned you are a proud leftwinger. I guess that means you not only turn a blind eye to dishonesty if it supports your ideology, you also try and turn interference for douchebags like the Krug.

  6. JC.

    I might add the above is about share of total taxes, not US federal taxes. State and city taxes in the US are highly regressive.

    Nearly all the arguments we see coming out of the US are about Federal taxes. This would show that nearly all federal taxes are paid by the highest income earners with 50% of people not only not paying any tax but also receiving credits.

  7. conrad

    Sinclair,

    what’s not truthful about the claim? As can be seen, all groups pay taxes. That’s clearly inconsistent with the claim that:”only the rich pay tax” however you want to scale the graph or what categories you want to use (one wonders why they don’t just fit a continuous function — are economists to silly to do this?). To me what the graph shows is that it would be almost worthless trying to incoporate those in the bottom 40% into any income tax scheme — indeed your scaling of it makes that even more obvious.

  8. Entropy

    But of the case Conrad, and I reckon it is, why should Krugman try to create the impression that the rich don’t pay ‘their fair share’. Not the same thing at all.

  9. conrad

    I don’t see why that graph does that. Neither of the different scalings look much different to me in terms of what they imply, except the first highlights that the US has a big gini coefficient (which it does). I also don’t see what is wrong with the categories (in either case).

  10. Sleetmute

    Yes, clearly Krugman is trying to show that the relationship between income and taxes paid is stable right up the income distribution. Here it seems that at least the poorest 20% pay much less than their income share. The point of Krugman’s argument seems to be that the rich have no right to complain about tax increases because the middle and lower-middle bear their fair share of the burden if ‘fair’ means proportional.

    However, the fact remains that in absolute terms, the rich pay the bulk of all taxes paid. Also, presumably the poor disproportionately receive transfer payments, although not sure how progressive those are in the US.

  11. TerjeP

    I prefer Krugmans chart because it contains more information. I don’t think the top 20% is what most people mean when the talk about “The Rich”. In fact I think it would be even better if the horizontal scale defined actual income brackets. Do people who say “soak the rich” really mean the local doctor should lose more of her income or do they have some other group in mind?

  12. dover_beach

    Yes, I prefer Krugman’s chart too for the same reason but it is still clear that he was being misleading and deceptive.

  13. Samuel J

    It would be good to have in one or two graphs:

    . a comparison between the US and Australia
    . including NET rather than GROSS taxes paid. A lot of so-called taxpayers receive more in the way of Government payments than they pay in tax. In my book they are not taxpayers.

  14. FDB

    The first graph is very clearly and prominently labelled, and the massive disparity between the bottom and top of the top 20th percentile (as Terje says) makes it very useful indeed to look at smaller increments as we reach the top. Only someone completely ignorant in reading graphs would find it misleading.

    Your suggested correction in the second graph lumps the incredibly rich in with the merely well-off, which (while also clearly labelled) is useless if you’re trying to disprove the given assertion (unless you first explain how they all deserve the tag “rich people”).

    The final graph is the least useful by far, verging on blatantly misleading, because it only looks at income tax.

    Fail Sinclair.

  15. Sinclair Davidson

    FDB – if you could read, you would have noticed that I wrote

    Here is the evidence for the rich paying the bulk of US income tax.

    This is probably the origin of the comment ‘only rich people pay taxes’. You do know the difference don’t you? Perhaps if you yourself paid income tax you might understand the issues?

  16. THR

    Other sources I’ve seen tend to attribute significantly more wealth to the richest 1% in the US. If the graph refers merely to declared income (as opposed to say, liquid assets) then it may well be that the richest 1% are not pulling their weight, tax-wise.

  17. Sinclair Davidson

    THR – the tax system targets income not wealth. The other stat is to look at the top .1 percent.

  18. Entropy

    FDB.

    Only someone completely ignorant in reading graphs would find it misleading.

    Most people do not know how to read a chart. They have no need to.

    Portraying the chart this way with the associated commentary is deliberate, and no doubt plays off the knowledge that most people do not even try to understand chart and just rely on the author’s interpretation. Most of the time the Krugs of the world get away with it.

  19. conrad

    “Most of the time the Krugs of the world get away with it.”

    I still don’t see what he was getting away with.
    The argument from Krugman was:”The claim that only rich people pay taxes is a zombie lie”. Sinclair then notes that the rich are paying their fair share (which is much harder to define, because that implies some value judgment about what “fair” is). Now maybe the graphs are bad for Sinclair’s argument, but they are the correct ones to use for Krugman’s.

  20. Sinclair Davidson

    conrad – how so? He disaggregated the tax paid by the top 20 percent to make it look similar to that paid by the rest. Most people (who struggle to read graphs) would be mislead by the Krugman graph.

  21. conrad

    Sinclair, the argument wasn’t whether the rich pay more, less, or an indifferent amount of tax in overall terms. He could have deleted the top 60% for all I care — the argument was whether the poor pay tax or not, and it is clearly the case that they do. Personally I don’t mind the disaggregation for the reasons others above have noted, which is basically that income does not increase linearly across the distribution (I presume I’m in the top 20% of earners, and hence you are too, but that’s vastly different to being in the top 1% — I’m sure both you and I need to think about what we buy sometimes after all).

    As it happens, for most data sets like this, unless you want to make a specific point, then you wouldn’t have some massive bars meaning that to learn anything from the small bars you need a microscope. I imagine that if this data set was on something uncontentious like, say, looking at the proportion of connective tissue in fibres of different animals, we wouldn’t try and stick mice and elephants on the same graph. We’d either take the proportion to start with or transform one of the axes by taking logs or something like that.

  22. Jarrah

    I see what you’re saying, Sinclair, with Krugman hoping to use the height of the graphs to mislead readers about absolute amounts of tax paid. But I think most people would be more interested in the difference between the income and tax heights for each division (no matter if it’s by quintile or finer divisions).

    Fairness would suggest they should be equal for each division. One version of fairness, at least.

  23. Sinclair Davidson

    conrad – I think you’re been a tad too literal. Anybody who drinks alcohol or smokes cigarettes in the US ‘pays’ tax – the argument is about how much tax people pay. The notion that the middle class bears the tax burden is incorrect and the notion that the ‘rich’ don’t pay tax is incorrect too.

    Jarrah – those differences are important too, but I suspect most people would just look at the zig-zag pattern.

  24. Samuel J

    And in any case what matters is nett tax: taxes paid less government benefits received. In that sense the bottom 20% don’t pay any tax.

    If Sinclair and I reach an agreement whereby I send him $1000 and he then sends me back $1000, can I really say I’ve paid Sinclair? Or, to put it more starkly, let’s say that Sinclair wants to say that he earned income of $10 million this year, I could write him a cheque for $10 million provided he doesn’t cash it and he could show that he earned $10 million.

  25. TerjeP

    A chart that shows what the top 20% pay in tax says nothing about the rich unless you assume that earning more income than 80% of the population defines you as rich. I’d struggle to accept that as the definition of rich.

  26. JC

    The first graph is very clearly and prominently labelled, and the massive disparity between the bottom and top of the top 20th percentile (as Terje says) makes it very useful indeed to look at smaller increments as we reach the top. Only someone completely ignorant in reading graphs would find it misleading.

    Doofus, so why didn’t he go with smaller equal increments.

    Your suggested correction in the second graph lumps the incredibly rich in with the merely well-off, which (while also clearly labelled) is useless if you’re trying to disprove the given assertion (unless you first explain how they all deserve the tag “rich people”).

    Ummm even if Sinc went with say 10% increments we would still see the same thing.

    The final graph is the least useful by far, verging on blatantly misleading, because it only looks at income tax.

    The last chart is clearly marked “total taxes”.

    Fail Sinclair.

    Oh please shut up.

  27. JC

    ….you assume that earning more income than 80% of the population defines you as rich. I’d struggle to accept that as the definition of rich.

    So, umm Terje, you would define high income earners as poor then?

  28. sdfc

    Krugman’s chart shouldn’t be difficult for anyone who can count to 100.

  29. TerjeP

    JC – your question does not flow from my statement. However the answer is no.

  30. JC

    Huh? You don’t understand your own statement then?

  31. TerjeP

    JC – In my universe most people are neither rich nor poor. However your visitations from the parallel universe of binary absolutism are amusing. I suppose there are only tall people and short people in your world, only fat people and skinny people, only poor people and rich people.

  32. JC

    Terje:

    Lets go through what you said again.

    …..you assume that earning more income than 80% of the population defines you as rich. I’d struggle to accept that as the definition of rich.

    Doofus, if a person earns more than 80% of the population they are by definition “rich”. It’s a relative thing you nimbus.

  33. Le Chiffre from Marseille

    You should also note that the US has an Estate Tax (a massive 35% above $5Mil).
    When people get old in the US they give away more money to charity to partially avoid the estate tax, i.e. since the tax man is going to take it anyway.
    You would be familiar with the charitable foundations of the US mega-rich.
    These large charitable gifts of the US rich are de-facto taxes paid. The state no longer has to provide the services that the charity provides.
    Safe to say that these charitable gifts are not be included in the tax paid by the wealthiest individuals figures.
    Therefore the contribution of taxes and de-facto taxes by the wealthiest in the US in even HIGHER than both your and crooked Krugman’s charts describe.
    Au revoir.

  34. TerjeP

    Yes it’s relative however when most people refer to “rich people” they are not typically refering to households with an income of $60000 per annum. They are usually thinking of corporate executives and movie stars.

  35. TerjeP

    Sorry I forgot we were doing insult banter. I should have addressed you as knucklehead. I’ll try harder in future to abide by this Catallaxy custom. You dweeb.

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