Taxes -- the AP is Cheerleading Again!

In a bizarre story this morning, the AP is announcing that "Super Rich see Federal Taxes Drop Dramatically"! The article then points out that the rate of taxes paid on the 400 highest tax returns has fallen from 26 percent in 1992 to 17 percent in 2007. This is, however, totally misleading. The average amount of income on these 400 returns was $345 million. That's right, we are talking about people who had taxable income of more than a third of a billion dollars. That means that the income in question came from one of two sources: capital gains or dividends. Both of these sources were taxed in 2007 at a rate of 15%. In 1992, the rate was 28% for capital gains and even higher for dividends. (I am assumeing that all capital gains are long term.) This change in the rate was not a tax break for the rich, rather it was a strategy to increase investment, economic growth and new jobs by lowering taxes on investment income so as to make investment more attractive. It is a strategy succesfully employed by economies around the world. In fact, it was not long after 1993 that president Bill Clinton, a Democrat, signed into law a major reduction in the capital gains tax rate just for the purpose of promoting economic growth. So, contrary to what the AP is implying, the drop in that tax rate was not meant to benefit the rich, but rather to help the entire country.

It is also interesting that the AP does not bother to set forth the total amount of taxes paid by the highest 400 returns in each of the years. The amount of tax paid is much higher in 2007 than it was in 1992. And, the AP also buries the fact that the percentage of taxpayers who owe no tax whatsoever is also much higher in 2007 than it was in 1992. Indeed, the tax reductions for the middle class results in lower taxes of well over three trillion dollars during the next decade while the lower taxes on those who Obama calls wealthy only reduces taxes by about 700 billion dollars during the same time. In other words, just about 80% of the tax reduction goes to the middle class. It is not a tax break for the rich unless you are a Democrat trying to foster class warfare.

There should be a national debate about simplifying the tax code; there is no question about this. On the other hand, it does a disservice to the country for an organization like the AP to publish articles that set forth bogus and misleading statistics.