May 11, 2008

Taking from the Not So Rich

Justin Katz

So proud of this little snippet from a Providence Business News piece is Patrick Crowley that he's mentioned it multiple times:

But what about the rest of us? After all, nearly 50% (48.7%) of the returns filed were for incomes BELOW $30,000 a year. And while this group pays 4% of the state’s income tax they actually earn only 3% of the income in the market. The $100,000-$200,000 group earns 24% of the wages but only pay 23% of the income taxes, and the $75,000-$100,000 group earns earn 14% of the wages but only pay 12% of the income taxes. This takes the “progressiveness” out of the “progressive” income tax. And because the other taxes people pay are “regressive” (property tax, sales taxes, etc) the picture becomes more clear – people at the bottom end of the income scale, not the top, are paying more than their fair share.

That's all one needs in order to conclude that it isn't worth the time or effort to pay for the article or the periodical in which it appears. It might be enough, for some, to observe that Crowley is not satisfied that just over half of all taxpaying households are paying 96% of the taxes, but so thick are the deceptions (or incomprehensions) embedded in his little paragraph that one can hardly stop there.

Although the numbers don't correspond precisely with the latest version online (2006, PDF), he appears to be working from the Rhode Island Division of Taxation's Statistics of Income Report on resident income taxes. If that's the case, then he's already skewed the data considerably for the claims that he's making, because he appears to be using the "RI taxable income" data for his percentages — the problem being that much of the progressivity for which he pines has already been figured into the numbers by that point. The picture changes considerably if one looks at AGI:

Under $30,000 $30,000 Under $50,000 $50,000 Under $75,000 $75,000 Under $100,000 $100,000 Under $200,000 $200,000 or More
% of total RI taxable income 2.4 11.2 15.0 13.7 24.6 33.3
% of total AGI 10.6 12.5 15.3 13.3 22.4 26.0
% of total RI income tax 4.0 7.9 11.4 11.1 23.7 42.1

The difference between the two are modifications, deductions, and exemptions — in short, those considerations by which the government addresses matters outside of raw income statistics that ought to affect the taxes that they pay. This manipulation becomes all the more notable when one considers the numbers on a per-tax-return basis and adds tax data:

Under $30,000 $30,000 Under $50,000 $50,000 Under $75,000 $75,000 Under $100,000 $100,000 Under $200,000 $200,000 or More
RI taxable income per return 1,860 23,401 40,185 59,433 96,854 472,615
AGI per return 12,393 39,127 61,609 86,450 131,809 551,011
Income tax per return 172 913 1,691 2,670 5,165 33,088
Tax % of RI taxable income 9.27 3.9 4.21 4.49 5.33 7.00
Tax % of AGI 1.39 2.33 2.75 3.09 3.92 6.00

The probability is that the likes of Crowley would look at the numbers and still decry the inequity across classes, and with that protestation we slip into more philosophical realms... except, of course, for a final adjustment of the picture to account for the distribution of those tax returns that were filed jointly by couples:

Under $30,000 $30,000 Under $50,000 $50,000 Under $75,000 $75,000 Under $100,000 $100,000 Under $200,000 $200,000 or More
% of returns jointly filed 11.5 28.8 55.5 78.5 86.8 85.7
RI taxable income per person 1,669 18,173 25,838 33,296 51,837 254,529
AGI per person 11,115 30,386 39,614 48,431 70,551 296,750
Tax per person 155 709 1,088 1,496 2,764 17,820

In short, when one accounts for different rates of joint returns, the average AGI in the lowest group decreases 10%, while the vilified $75,000-$100,000 and $100,000-$200,000 groups show decreases of 44% and 46%, respectively. Crowley distorts his data, that is, to the detriment most especially of working and middle class families. It would be fair to ponder for whose benefit he labors.

Little wonder socialists can't make the world work the way they want it to.


Rushing to post this earlier, in order to get to my husbandly duties in the yard, I had a persistent feeling that there was one final "and so" that I wasn't noting. Fresh air and dirty hands having cleared my head, I realize that it was the ratios of each group in each category — holding individuals in the Under $30,000 group to 1 and seeing how individuals in each other group compare by that measure:

Under $30,000 $30,000 Under $50,000 $50,000 Under $75,000 $75,000 Under $100,000 $100,000 Under $200,000 $200,000 or More
Individual RI taxable income ratio to lowest 1 10.9 15.5 20.0 31.1 152.5
Individual AGI ratio to lowest group 1 2.7 3.6 4.4 6.3 26.7
Individual tax ratio to lowest group 1 4.6 7.0 9.7 17.9 115.2

And so... taking into account jointly filed returns (the appropriate methodology for which is certainly up for discussion), and sticking with AGI numbers, there simply can be no doubt that our tax structure is disgracefully progressive, in the way in which Crowley desires.

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Well done.

One must remember that Patrick Crowley is also the fool that told us education Instruction Expenditures (which includes teacher salaries) have risen at a slower rate than inflation, when in fact the results were just the opposite.

Education funding rose 42% more than inflation during the period Crowley spoke of. The dope compared 5 years of spending to 7 years of inflation when he did is flawed "analysis".

Indeed, Crowley & Co. are never ones to let facts get in the way of a good story.

Alas, there is a very simple solution to Crowley's lament. He should just tell all his "poor" friends to become "rich", since it apparently is such an easy thing to do.

Posted by: George Elbow at May 11, 2008 3:40 PM

These stats apparently don't separate out people like two individual taxpayers of my acquaintance, both of whom fall far short of $30K per annum. They are my college age children. There also doesn't appear to be a way to determine how many are starting jobs after graduating high school or college, either. Or to determine how many are retiring at the other end of a career. Interestingly enough, yesterday my son got a notice from the IRS asking why he didn't elect the Earned Income Tax Credit computation for which he is apparently eligible along with the economic stimulus payment.

These may be minor adjustments to percentages of people in the under $30K bracket, but as my daughter only earned $3K - and thats typical for college students - it skews income well downwards - as is true for all the HS kids working (hopefully very) part-time. Mr Crowley is unlikely to bother finding out, because it doesn't support his argument. Mr. Crowley also doesn't document low income earners tax consumption in the form of subsidized housing, child care, health care. How about showing which way net payments flow?

For those making $30K or less whose income will not grow above this level and who are not still on the parent's payroll or retiring, I'm sorry to hear it. For a reason, look to the state's donk politicians who have created a perfect storm of job and opportunity suppression and to those who undermine your labor value by ignoring illegal immigration. I know that when my kids are done with college, they will be done with this state and that perhaps is something the under $30k earners should consider, too.

Posted by: chuckR at May 11, 2008 4:16 PM

"he appears to be using the "RI taxable income" data for his percentages"

What? That's ridiculous. If that's the case, his analysis means nothing.

Posted by: Monique at May 11, 2008 5:05 PM

It should be noted that Mr. Pat Crowley, who is expert at crowing distortions with respect to all things financial in a futile attempt to support his Socialist agenda (you know, the one where the motto is "you work and produce, while I sit back and consume"), is the right-hand boy of and was mentored by Mr. Bob Walsh, both of whom are members of that stink tank, I mean think tank, the NEA.

Yes, Mr. Bob Walsh of the famous "Walshian Assumptions" that tells us the Pension systems is self sustainable via the Contributions of employees and the the earnings thereon, yet who refuses to consider going to a 401k style plan where his flock would have to live and die by his bad assumptions (i.e. take some risk go along with their current gauranteed reward)and who also fails to explain why the pension fund is insolvent despite the fact that his "assumptions" tell us the fund should be in just fine shape.

Justin: you'll have to provide Mr. Walsh with your credentials, as well as the legal and financial back-ground that gives you license to challenge his and Pat's "thinking". You see, they are not used to people applying common sense to issues and questioning their assumptions and conclusions. Rather, they are used to a flock of sheep following blindly as the good shepherds Bob & Pat lead them over a cliff.

Posted by: George Elbow at May 11, 2008 8:07 PM


If you ever get a response from Pat/Tom on this question, I hope that you will post it for the rest of us to see. My attempts for clarity have proven fruitless so far.

Something about an honest dialogue seems to trouble them. I wonder why?

Posted by: Pragmatist at May 13, 2008 2:01 AM
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