Everyone’s heard the phrase about “lies, damn lies, and statistics,” but Isaac Shapiro, a senior fellow at the Center on Budget and Policy Priorities, explains today how and why Bush’s tax plan falls comfortably into the “damn lies” category.
In a must-read column in today’s LA Times, Shapiro explains that the Bush White House is playing fast and loose with the facts by misusing the word “average.”
Bush and other administration spokespersons tout the advantages of the latest tax cut proposal (to complement the $1.35 trillion tax cut Bush signed less than two years ago that drove the U.S. budget back into the red) by emphasizing the broad benefits to be enjoyed by taxpayers, regardless of their socio-economic status. The purpose, of course, is to inoculate the White House from charges that its policies are disproportionately helping the very wealthy — which they are.
Bush says, for example, that his new tax cut plan would give “92 million Americans…an average tax cut of $1,083.” He adds that “23 million small-business owners across America will receive an average income tax rate cut of $2,042.” While these remarks may not technically be lies, Shapiro’s op-ed highlights why they’re incredibly misleading.
“Most taxpayers and small-business owners would receive far less than this average amount because, in generating its figures, the administration has averaged the massive tax cuts that those at the top would receive with the far more modest tax cuts that those in the middle of the income spectrum would get,” Shapiro explains. To further demonstrate how this works, Shapiro offers a useful example: “If 10 people were in a room, nine of whom have low- and middle-incomes but one of whom is Bill Gates, on average all of these people are very rich.”
So what would taxpayers receive from the policy? Shapiro writes that Americans right in the middle of the income spectrum would get a $256 tax cut. Ultimately, 80% of taxpayers would get less than the $1,083 that Bush says would be “average.” If this is true, how then does Bush (or more accurately, Bush’s policy advisors) arrive at this figure? By using the trick that makes everyone in the room with Bill Gates, on average, extremely wealthy.
“The top 1% of tax filers would receive an average tax cut of $24,100 in 2003, and those with incomes of more than $1 million would get tax cuts averaging a whopping $90,200,” Shaprio writes. “Like those 10 people in the room, it is the huge tax cuts that the wealthier groups receive that drive up the overall average.”
The same is true for the alleged benefits for small business owners. “Similarly, nearly 80% of filers with small-business income — or nearly four of every five — would receive less than the $2,042 average the administration is touting. The majority of all small-business owners would get less than $500.”
While it’s easy to shake your head at the Bush administration’s duplicity, it will only be an economic debacle if members of Congress fall for this scam and pass Bush’s plan.