Just as President Obama today once again called on Congress to prevent a large tax hike on middle class individuals and families, The Washington Post's Glenn Kessler put out a "fact check" on an Obama campaign tweet - an analysis that as out of touch with the realities of the middle class as Mitt Romney himself. The Obama campaign tweet in question?
“FACT: In 2010 and 2011, Romney paid less than 15% in taxes on $42.5 million in income—much less than what many middle-class families pay.”Giving this tweet 'three Pinocchios,' Kessler terms the tweet misleading, on the grounds that according to a Tax Policy Center analysis, the overall federal tax rate for the bottom 80% (based on adjusted gross income), is (including their portion of the payroll tax) of 13% or below, a little lower than Romney's tax rate of about 14-15%.
— Tweet by @BarackObama, July 3, 2012
Lies, damned lies, and statistics.
Kessler misses the point about a mile and then some as his 'fact check' utterly fails to stay in touch with the realities of middle class families. Kessler ignores 3 major components of what should be part of any numerical analysis like this:
- The ocean of gap between the incomes of middle class families and the Mitt Romney's of the world.
- What lowers middle class tax rates vs. what lowers Mr. Romney's.
- A corollary from the above: would middle class individuals and families similarly situated (other than in income, of course) as the Romneys pay less or more as in tax rates (introducing the law of averages)?
The first one of these points is the easiest to decipher, but that doesn't diminish its importance in the slightest. Even the 4th quantile (the second highest 20% of income earners) make between $59,000 and $103,500. Mitt Romney makes about $21 million a year. That is a whopping 203 times the higher end of the 4th quantile of income earners. 203 times. And the absolute best lipstick that can be put on this pig is that Mitt Romney pays approximately the same overall federal tax rate as those who (at best) make in an entire year what Mitt Romney makes in less than two days? If that doesn't underscore the deeply rooted unfairness in our tax code (which was the main point of the Obama campaign tweet), I don't know what is. That this gaping hole did not register with the fact checker of record of the Washington Post is not simply a failure of journalism, it is a moral failure of an elite press that lives in a bubble far from the lives of average Americans.
The reason for the effective rates: what lowers middle class rates vs. what lowers Romney's
The reasons why Mitt Romney's tax rate is 15% and why a middle class family's rate may be close to the same are drastically different. Mitt Romney's rate is low primarily because of one reason: the vast majority of his income comes from money made from money, i.e. "capital gains." This is taxed at a flat 15% (hmm...). Middle class income earners, though, mostly make their money from working, which is taxed using a scale, with a marginal rate of up to 35%. Plus, the bottom 80% pay payroll taxes on all of their income.
So what lowers the rate of the middle class? For one thing, the President lowered the payroll tax rate for the middle class over the past two years. But other than that, the biggest factor reducing the taxes a middle class family pays is... children. The biggest tax reducers for a middle class family are the earned income tax credit, the child tax credit, and the mortgage interest deduction. Other than the fact that Mitt Romney and his class and privileged with the ability to claim mortgage interest deduction on both their 'primary' and 'second' homes (both far more expensive than the average home for the middle class family), thus far outstripping the amount of deduction a middle class family lucky enough to own a home (but just one home) can get, just what justifies Romney's tax breaks? Are Mitt and Ann Romney still raising their adult children and spending money on school supplies, gas on getting their children to and from school, child care, and whole heap of other expenses one incurs with having children?
Most middle class families with children - who, by the way, have to spend a lot more on raising children than they get in tax breaks for doing it - lower the average middle class tax rate, which, of course, isn't case for Mitt Romney, whose children are grown, $100 million trust-fund-babies.
This is why comparing straight effective tax rates are at best a deceptive and cynical way of trying to cover up the deep immorality embedded in our tax code. The rich don't have to do anything for their coddled tax rates.
The corollary: what if we took a childless household and compared their tax rate with that of Mitt Romney's?
Middle class, childless, non-elderly households do in fact pay effective federal tax rate that is higher than Mitt Romney's rate. The middle quantile (the middle 20%) of childless households paid a 17% effective federal tax rate, and the fourth quantile of childless households paid an average of 20% effective rate in 2007, the time of the latest available data. Where did I get that from? The same place Glenn Kessler gets all the data for his analysis on, the Tax Policy Center.
The tax code has changed somewhat since 2007, of course, thanks mainly due to President Obama's policies to expand the earned income tax credit as well as reducing the payroll tax rate. But the 2010 tax cut compromise also made for a lower estate tax (largely paid by the wealthy) rate than 2007 (right now, the estate tax rate is 35% with a $5 million exemption, in 2007, it was 45% with a $2 million exemption - eventually coming to zero in 2010 under the Bush tax cuts), so we can call that a wash. Even if we didn't, the tax rates for childless middle class household would still remain above Mitt Romney's effective tax rates for Mitt Romney.
So the Obama campaign's tweet isn't just correct in expressing the very real fact of a tax code that favors the wealthy. It is also correct in its specificity that Romney pays a lower rate than the middle class, comparing apples to apples (to the degree one can - keeping in mind that Romney's apple is about 203 times as big as those of the fourth quantile of income earners in this country).
An out-of-touch fourth estate
That Glenn Kessler not once thought to make this apples-to-apples comparison, that he not once bothered to point out the gulf of income gap (even if with similar tax rates) between working Americans and those in the class of Mitt Romney, that he not once thought to factor in the conditions which result in a given effective tax rate for the middle class vs. that for Mitt Romney is a shameful reminder of how far our fourth estate has fallen down. Our founders zealously protected the freedom of the press not so that the press could live in the same bubble as the ball rooms in DC and the upper West side. They guarded the freedom of the press precisely so that they can shatter those bubbles.
I have said it before, and I will say it again. Kessler's "analysis" isn't just bad analysis and bad journalism, it is a moral failure. It is a failure not simply of the breath of analysis. It is a failure of the ability to relate to those work for a living. It's time our "fact checkers" of record familiarized themselves with the facts of the lives of working and middle class Americans.