Tuesday, September 20, 2011

This is How They Lie to You

I've been absolutely blown away by the speed with which Obama's statements about the "Buffet tax" have been misconstrued.  It's even reached Yahoo News, which is what spurred this post.  I've already linked some other articles on this, but I'll briefly quote Yahoo on the subject.

President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are. ...

On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

The problem with this statement is that Obama never claimed that the average millionaire was being taxed less than less wealthy Americans, he simply claimed that some wealthy Americans were paying less.

How about we actually look at Obama's speech.

And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations –- tax breaks that small businesses and middle-class families don’t get.  And if tax reform doesn't get done, this plan asks the wealthiest Americans to go back to paying the same rates that they paid during the 1990s, before the Bush tax cuts...
In fact, I’ve cut taxes for the middle class and for small businesses, and through the American Jobs Act, we’d cut taxes again to promote hiring and put more money into the pockets of people.  But we can’t afford these special lower rates for the wealthy -– rates, by the way, that were meant to be temporary.  Back when these first -- these tax cuts, back in 2001, 2003, were being talked about, they were talked about temporary measures.  We can’t afford them when we’re running these big deficits.
Now, I am also ready to work with Democrats and Republicans to reform our entire tax code, to get rid of the decades of accumulated loopholes, special interest carve-outs, and other tax expenditures that stack the deck against small business owners and ordinary families who can’t afford Washington lobbyists or fancy accountants...  That means that how much you pay often depends less on what you make and more on how well you can game the system, and that's especially true of the corporate tax code.
We’ve got one of the highest corporate tax rates in the world, but it’s riddled with exceptions and special interest loopholes.  So some companies get out paying a lot of taxes, while the rest of them end up having to foot the bill.  And this makes our entire economy less competitive and our country a less desirable place to do business... And we can lower the corporate rate if we get rid of all these special deals.
So I am ready, I am eager, to work with Democrats and Republicans to reform the tax code to make it simpler, make it fairer, and make America more competitive.  But any reform plan will have to raise revenue to help close our deficit.  That has to be part of the formula.  And any reform should follow another simple principle:  Middle-class families shouldn’t pay higher taxes than millionaires and billionaires ...

So far so good, but now we're getting to the tricksy part.  Yahoo, and others, quote this bit:

Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.  There is no justification for it.
It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.
Without also quoting the most important bit:
They should have to defend that unfairness -- explain why somebody who's making  $50 million a year in the financial markets should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that -- paying a higher rate.

My key point here being that there is already a massive counteroffensive against the public perceiving things from the Democrat's point of view.  Obama is not, and never claimed to be, talking about the average wealthy individual.  His speech was about a particular set and not wealthy people who are doing their bit under the general provisions of the tax code:

All I’m saying is that those who have done well, including me, should pay our fair share in taxes to contribute to the nation that made our success possible.

So those wealthy people who are making their millions and billions without needing to take advantage of tax shelters and favorable tax treatment are largely irrelevant to Obama's speech.  It doesn't matter that the average wealthy person is paying more in taxes, it matters that a certain large set of wealthy people, such as Warren Buffet, are able to pay far less in taxes meaning that wealthy people that earn their incomes by other means are paying far more in taxes than other wealthy individuals.  It matters even more that many economists think that the particular way in which these taxes are avoided are particularly damaging and distortionary.  It also matters that a sense of what the wealthiest individual's fair share is has been decreasing decade by decade for the last several, with no corresponding increase in general economic growth or growth in income for the rest of society.

My main point is that I agree with Obama when he says:
Now, we’re already hearing the usual defenders of these kinds of loopholes saying this is just “class warfare.”  I reject the idea that asking a hedge fund manager to pay the same tax rate as a plumber or a teacher is class warfare.
 This reframing of the issue from Obama's point about a minority of wealthy individuals who take advantage of tax loopholes and the need to curb these abuses to framing the speech as instead being about the average wealthy person is class warfare in action.  It distorts the message in order to control and reframe the debate.  I'd bet in a few days we'll see the Conservative chattering class going on about how stupid liberals can't even do math to realize that the average wealthy person pays more in income taxes than poorer individuals.  Which isn't, and never was, the point.

This is how they lie to you and why it is necessary to be careful about what you read, even when you are reading fact checking.

[Update:  For the record, I don't like what I've heard about the Buffet tax so far.  My understanding is that it is simply an AMT for aggregate gross income, rather than just income.  The AMT is highly distortionary and makes the tax code far too complex and burdensome and should be done away with in favor of reducing the number of exemptions.  It would be better to simply raise the capital gains rate closer to the income tax rate (there is a good argument for it being somewhat lower, but it should be close, the current gap seems inefficiently large).  Capping the home mortgage interest deduction would help a great deal as well. The Buffet tax looks mostly to be playing politics, there are better ways of achieving the same result, though this isn't the worst way.  Raising the capital gains tax would probably anger AARP and the financial industry more than the Buffet tax, which is why I think he's avoiding it.  None of this changes my central point of this post though, there is an effort across many platforms to reframe this speech away from the actual issues it addressed and make the popular perception of it something quite different.  It's a bit disturbing to see this happen so quickly.]


  1. Posts like this, Tzi, is why I read your blog.

  2. (but the reason why I casually continue to inflict pronoun errors on you eludes me)