Caveat lector

DESPERATELY SEEKING DATA (PART 1)! Hannity shed wet tears for the wealthy. Then along came that chart in the Times:

MONDAY, JANUARY 27, 2003

TEACHING IT FLAT: One of the most remarkable items in last week’s press was that chart in Tuesday’s New York Times (see THE DAILY HOWLER, 1/23/03). The chart showed what percentage of their income different income groups pay if you include all taxes—federal, state and local. The chart accompanied a piece by economics writer Daniel Altman. Here’s what different income groups pay according to Altman’s chart:

Top fifth of earners: 19 percent
Next fifth of earners: 17 percent
Middle fifth of earners: 16 percent
Next fifth of earners: 14 percent
Bottom fifth of earners: 18 percent

If that chart is accurate, the top fifth of earners—average income, $117,000—pay 19 percent of their income in taxes. The bottom fifth—average income, $8000—pay roughly the same percentage. To see Altman’s chart, just click here.

If that chart is accurate, it flies in the face of normal ideas about the way our tax codes work. And it flies in the face of persistent spin that drives our political discourse. Here, for example, was TV’s servant-to-the-powerful Sean Hannity, boo-hoo-hooing once again about those overtaxed upper earners:

HANNITY (1/8/03): If Democrats say tax cuts for the rich, which is the mantra—if they say that all the time, don’t we have to define what the terms are? Let me put up on the screen and hopefully you can see it there. If not, I’ll read it to you. According to it, the top one percent pays 37 percent of the taxes; top five, 56; top ten percent, 67.3 percent of the taxes; bottom 50 only paid 3.9.

As usual, Sean was being slick. By “taxes,” he actually meant “federal income taxes,” one of our few progressive taxes. And he didn’t say how much income the top one percent earn; to state the obvious, you can’t judge the amount of tax this group pays if you don’t know the amount of income they’re earning. The structure of Hannity’s spin-point is clear; viewers are supposed to be stunned by the fact that “37” is a much larger number than “one.” All across the expanses of Dittohead Nation, jaws are supposed to drop onto chests when those two numbers flash up before them.

In short, Hannity wants his viewers to think that upper-income earners are vastly over-taxed. But Altman’s chart seems to say something different; it seems to say that our lowest earners pay the same rate of taxes as those at the top. And as noted, if Altman’s chart is on the money, it flies in the face of most normal understandings. For example, when Tim Noah discussed the chart last week, Slate’s headline expressed his surprise; “Tax rates are already flat,” the head said. As most people would, Noah expressed substantial surprise at the picture Altman portrayed.

But how much do different incomes groups pay? For an average observer, it’s almost impossible to answer that question. The topic is spun on a daily basis, but real facts are quite hard to come by. In our current benighted public discourse, we buy spin by the ton and facts by the ounce—and the few facts we purchase are brilliantly muddled. Reading on in Altman’s piece, the startling facts laid out in that chart seemed to be swiftly contradicted. [Tomorrow: Those 51 cents]

FRIST THINGS FRIST: The good Dr. Frist was at it again, declaiming about his own virtues. In an interview for Friday’s Special Report, Carl Cameron asked the Senate surgeon if he was tough enough to be Majority Leader. As usual, the self-impressed sawbones served irrelevant thoughts about his own godlike qualities:

FRIST: I don’t know how good of a majority leader I’ll be. I just don’t. It would be presumptuous for me to say that. About being tough enough? What I did before coming to the United States Senate was to split people’s chest open, to open the chest, to reach in, operate on the heart, and if that wasn’t the right operation, actually cut that heart out. And go to another individual and open them up and take a heart out and put it in. And that’s not being aggressive, but it basically shows that I want results, I’ll do what it takes to have it done, and at end of the day, somebody is going to have a better quality of life because of it.

Frist didn’t want to be “presumptuous,” so he treated Cameron to irrelevant comments about his past godlike behavior.

Frist loves to spin his life as a surgeon, but has done less chatting about other matters. For example, how about his family’s health care business, Hospital Corporation of America? We couldn’t help noting this striking passage from yesterday’s Washington Post:

JEFFREY SMITH: As Frist was entering politics, House and Senate committees—including one chaired by the senator whom Frist would defeat in 1994, James Sasser (D-Tenn.)—were conducting hearings about Medicare fraud by health care providers, including HCA. In 1993, a General Accounting Office audit alleged specifically that HCA had improperly billed Medicare for partial reimbursement of its spending on items such as liquor, flowers, symphony tickets, a sailing regatta, scholarships for its employees’ children, a costly corporate reorganization and a public relations firm to counter its negative image.

Since then, the company has paid at least $1.47 billion in fines to settle federal lawsuits for improper billing and other regulatory violations. Frist did not make any comment about HCA’s business practices during either of his [Tennessee Senate] campaigns and, through a spokesman, declined to do so for this article.

Almost $1.5 billion in fines! As Smith notes, Frist never worked for HCA, but he holds massive stock in the self-dealing company, which was run by his immediate family. Strange, isn’t it? Frist is quick to chat about certain things, and reticent when it comes to others. Meanwhile, why does the Tennessee transplant get such sweet press? You may remember. If not, just click here.

The Daily update

TOIL AND TROUBLE: Is the estate tax a form of “double taxation?” When we discussed the topic last week, e-mailers rushed us this Standard Complaint (see THE DAILY HOWLER, 1/22/03). Indeed, as anyone who follows the public discourse will know, “double taxation” is the great cry of spinners promoting repeal of this dastardly levy. But is this Standard Spin on point? Other e-mailers wrote to say that, unless an estate was built from saved wages, it is entirely possible that the estate was never subjected to taxes at all. And let’s face it: You can’t tax an estate a second time if it hasn’t been taxed in the first place.

In their new book, Wealth and Our Commonwealth, Bill Gates Sr. and Chuck Collins speak to this much-bruited point. “[T]he bulk of assets that are taxed in people’s estates take the form of appreciated property that has not been taxed at all,” the pair write. “The largest percentage of taxable estates are stocks and real estate in which there are substantial capital gains that have never been taxed.” They quote some wickedly great estimates:

GATES AND COLLINS (page 84): Estimates by economists James Posterba and Scott Weisbenner, based on data from the Survey of Constituent Finances, suggest that unrealized capital gains make up about 37 percent of the value of estates worth between $1 million and $10 million and over 56 percent of estates worth more than $10 million. In the case of family-owned businesses, several studies suggest that between 66 and 80 percent of the value of such enterprises are unrealized capital gains.

The pair continue: “The complaint that the estate tax is double taxation is a rhetorical point, not an economic principle.”

In fact, Gates and Collins are being polite when they call DT a “rhetorical point.” In the debate on estate tax repeal, “double taxation” is a loud piece of spin—a piece of spin that is generally ignored by the major media. The pattern here is quite familiar. Whenever the estate tax issue is discussed, well-paid spinners yell “double taxation”—and the major media sit silently by. Does this levy involve “double taxation?” The average citizen has no way of knowing the facts behind this well-rehearsed spin-point.

Remember: Our discourse buys spin by the ton—and facts by the ounce. We continue our desperate search for data all through the course of this week.