Misleading use of statistics: an example

| Monday, April 18, 2011
As a general rule of thumb, I've found that conservatives are more likely to be deceptive liars than liberals. Of course rules of thumb don't stand up when the liberals in question are really focused on giving conservatives the finger. Case in point: Super rich see federal taxes drop dramatically: Forty-five percent of American households paid no federal income tax whatsoever

It opens with this masterful attention-grabber followed by two facts which may or may not be related, but which sure sound bad together.
Still scrambling to file your taxes? You'll probably take little consolation in hearing that the super rich pay a lot less taxes than they did a couple of decades ago. And nearly half of U.S. households pay no income taxes at all.
Paying taxes isn't fun for anyone. Taxes on the rich have gone down. 45% pay no taxes? My god, this must mean that 45% of rich people pay no taxes!

Er wait, let's see again... No that doesn't quite add up. Let's see, there are a whole lot of people/households on the low low end who pay no taxes because they're poor enough. Yet by not dividing up that 45%, the lowest end is used to support the highest end when crafting a misleading message. Ironic, given that Salon isn't known for its love of trickle-down theory, which is itself a "high is low" misleading message.

Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
I agree wholeheartedly with that second part. In fact it's one of my goals when I go for my master's degree, to look at how to make the tax code less ridiculous.

Oh hey, we finally get to it, nice deep down when writers/journalists know people have stopped reading.
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.

So not only do they take this long to get to the fact that most of that 45% aren't rich, but also that the 45% aren't living in some tax-free bubble.

Throw in statistics like "More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent," and it's looking like an argument in favor of raising taxes on the poor. Which maybe that isn't such a bad idea. If we subscribe to social darwist theories or the idea that the rich are rich because they're better with money (more economically efficient) and job creators, then it would seem that the most economically sensible system is one that taxes the poor and gives to the rich, thereby transferring money from the stupid to the smart. Of course those born poor might object, but as long as we avoid socialist public education, we can ensure that they are stupid, thereby preserving the theoretical foundation for the system.

I wonder if the article is an example of padding gone wrong. If they just stuck to the points: rich people pay lower taxes than they ever have, they have a ton of exemptions, and it's hard to get rid of these exemptions for political reasons, the article would be better. And shorter. But instead they wanted to jam in the 45%, quite obviously to create a false connection between the 45% and the wealthy, and possibly to add length, and as a result they ended up seeming to say the opposite of what they intended.

Still, misuse of 45% is literally half as bad as misuse of 90%. #notintendedtobeafactualstatement


Jonathan said...

The core problem, of course, is the use of statistics not to understand a problem so you can produce a solution, but to support a pre-determined solution. Both sides tend to be equally bad about that, honestly.

As to making the tax code make more sense than it does now, why set your sights so low? I suspect a four year old could do that, with a bit of help. The real question is: what should the tax code look like, and what are its goals? I'm actually very curious to see what you come up with. I tend to be on the other end of the spectrum from you politically, but right now we all need good ideas from people that want to fix the thing. I hope you put forward some of your thoughts as you work through it.

Nils said...
This comment has been removed by the author.
Nils said...

Germany GDP: $3300 Billion
Gov. revenue: $1400 Billion
Current annual deficit: $66 Billion

USA GDP: $14675 Billion
Gov. revenue: $2000 Billion
Current annual deficit: $1420 Billion

You're not wasting too much money, or spending too much. You have a revenue problem!

There's not way you can have western european living standards and an army a magnitude more expensive for half the taxes!

Corrected a €->$ conversion.

Aracos said...

It's like the old saying goes. "There are lies, damn lies, and statistics." :P

Michael Young said...

I've always favored the idea of class warfare, where it's us 60%ish of the country who pay more taxes than we receive back in welfare/subsidies against the 40%ish of the country who are net receivers, who get back far more than they pay in.

The reason why our revenue is low compared to our gdp is that essentially the middle class pay very little in taxes. If you just look at the rich people, the top 10% earn 33% of all wages and pay 45% of all taxes collected. That's the largest gap in the industrialized world. Compare to Germany, where the top 10% earn 29% of all wages and pay 31% of all taxes collected. A fair tax should fall on people in proportion to what they earn. But in America, the rich people already pay 1 and a third times their fair share. America's tax structure is far more progressive than all of Europe.

Here's a link to source data. http://www.taxfoundation.org/blog/show/27134.html

What we have is a spending problem. We need to decide on how much we're going to tax people, and then not spend beyond that. Let other nation's build their own militaries, so we don't have to police the entire world anymore. Let people save their own money for retirement, instead of just putting the entire nation on a pension plan.

Just as an aside, how crazy is it that the group of people who contribute 45% of all taxes only have 10% voter representation in determining how that 45% money gets spent? That's undemocratic!

Nils said...

I have links as well.

You tell me this is progressive ? ;)

Michael Young said...

Why, yes I do. If it were not progressive the rate would be flat. Whereas that chart shows that we punish people who earn more money by stealing a larger and larger proportion of it.

That the top 1% average is lower than the top 20% average suggests to me that we are truly on the other side of the laffer curve, and _lowering_ taxes would create more revenue, since the very rich are clearly working hard to avoid paying the inflated rate the top 20% are assessed.

Klepsacovic said...

@Jonathan: I might be biased, but every time I search for right-wing bias, I always find it! ;)

When I say more sense I don't mean something basic like simpler forms. I mean looking at how taxes shape behavior. In the Us we have low gas taxes, so we use a lot of gas, whereas Europe they are higher, so they use less gas. Of course infrastructures plays into this, which tends to create cyclical relationships. We can't raise gas taxes because we need cars, but we won't get rid of cars and need for cars until we have different infrastructure, and so on.

@Nils: Good point. This is why I've been saying we should just bite the bullet and start looting when we invade countries.

@Michael: You're leaving something out there: the relative income of rich and middle in the US and Germany. We have a much bigger income spread, so even with a flat percentage the rich would be paying more here, a lot more.

That 10% actually has a lot more than 10% representation, thanks to what isn't legally bribery, but fills the same purpose: campaign donations.

Besides, you're leaving out the externalities. Would the rich be as rich without a stable society? I doubt it.

JoeNavy said...

Not being into ecomnomics myself I'll refrain from commenting on the substance of the study.
I am however a Philosopher and can give another example of a published paper gone wrong.
The American Journal of Surgery has published a transcript of a presidential address titled, "Can prayer help surgery?",
Now I almost didn't even read this paper because I'm already very familar with all 800+ studies referred to in the report...No study has EVER shown Prayer to help in any medical field for any reason.
Anyway I digress. After the first page if became very apparent this Doctor had no interest in the findings of the studies.

This thing is 6 pages of flowery drivel about feelings and Gods will. With a conclusion of "Does prayer help surgery? No, but it makes people feel good" WHAT THE FUCK! Really? And this dude finished medical school?

Michael Young said...

I do like how that chart looks to support my bottom 40% vs top 60% class warfare thing. :P

There's very clearly the 'normal rate' in the top 60% and the 'reduced rate' among the bottom 40%.

Klepsacovic said...

Sorry about the slow publish, Joe. I didn't see it get stuck in spam. Clearly too much talking about God. :)

Studies like that worry me, not for the direct subject of it, but for the effect it has on ignorant people. So often questions are asked with the implicit "yes", resulting in people thinking that prayer is all they need.

Nils said...

Most problems could easily circumvented if people started to look at the big things. You will always find some small nominal/real tax rate that is the the way you wish it was.

Look at what is going into the government budget in different countries. Besides: where do these 60/40 come from? is it some kind of magical number ? :)

About that Laffer curve: Have a look at scandinavian countries. Highest living standards in the world. Low defizits. And 50-60% of GDP is spent by the government.

(Always a pleasure to find a republican. In Europe 90% of all US citizens you have contact with are democrats. :)

Tesh said...

Really, Nils? 90%? Not that I have reason to doubt you, but that may well explain some of what I've seen in foreign relations across the pond.

As for GDP, taxes and such, I find the following article sums it up nicely:


He has a bunch of other great articles (it's especially delicious when he skewers both political parties), but that one is a good summary of a few things.

Klepsacovic said...

@Tesh: You didn't know that the EU screens party registration when granting visas? (joking, maybe)

GDP is overused. All it says is "things that we measure are happening*." It does not say whether the investment or consumption is smart. It does not say whether the I or C are making us happier. It's a number that I'm starting to think we should have never thought up because it has a bad habit of being misused, because it can only be misused.

* As a great example of the absurdity of GDP: If I clean my house and someone meditates, GDP is unchanged. If I work, GDP goes up (makes sense so far). Now I spend that money to hire the person meditating to instead clean my house and suddenly cleaning my house is counted in GDP. My job is essentially getting counted twice, by itself and by magically making my cleaner house economic output. The meditation is lost in the shuffle.

Yaggle said...

The entire United States is being a bunch of crybabies right now. Everybody wants the other people to pay more taxes, but not themselves. We all need to pay more taxes. However, the wealthy are being BIGGER crybabies. The low and middle class are crying to be able to keep living in a house and driving a car, sometimes even less than that. Wealthy people are crying to keep themselves keep on getting more wealthy(which they have been doing very well). There is a huge amount of dishonesty on the issue politically right now from all directions, but as Klepsacovic said, conservatives are more likely to be deceptive liars than liberals. I do believe that conservatives feel strongly that they are right and feel that they need to manipulate the masses by whatever propaganda is necessary. But heck, I could be wrong about the reasons.

Klepsacovic said...

"Everybody wants the other people to pay more taxes, but not themselves."
That's the situation always and everywhere. People hate taxes. Even I hate taxes. The problem is that we also really like [some] of the stuff we get from those taxes, like healthcare and the ability to blow up anything in the world within two hours of wanting it blown up.

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