January 8, 2009

Governor Battles "Soak the Rich" on Newsmakers

Justin Katz

Governor Carcieri's appearance on this weekend's Newsmakers is already online. He certainly makes me a lot less self-conscious about talking with my hands on television. Performances aside, Ian Donnis was responsible for an interesting exchange:

Ian Donnis: Governor, wealthy Rhode Islanders have received tax cuts over the last ten years, so how do you respond to those critics who say that it's unfair that middle class Rhode Islanders are paying a bigger share of the tax burden?

Governor Carcieri: They're not. Middle class Rhode Islanders actually are relatively low taxed. I mean, I'm not in favor of taxes, and I would like to reduce them for everybody, but if you compare the taxes that our citizens pay in the middle income with nearby Massachusetts, they're lower — income taxes.

Ian: But if the affluent residents are paying less, doesn't that raise the burden on other Rhode Islanders?

Carcieri: We've been actually bringing the costs down. We've been reducing the cost of government, if you will. That's my point. We've taken eighteen hundred people out of the workforce. The annualized savings, when you take benefits and that, it's almost $200 million a year, Ian. You can't tax people. What do they do? They leave. That's our basic problem — what I said at the beginning. We're driving away businesses; we're driving away people that have been successful. That's not smart economic policy. We ought to be welcoming them here and figuring out ways.

For some perspective from the House Revenues Tax Facts report (PDF), here's the change in tax liability — the amount of money from 2005 to 2006 to which the state government laid claim — for each income group:

2005 ($) 2006 ($) % change
Total 965,459,393 1,025,126,595 6.18
<$30,000 42,701,426 40,475,498 -5.21
$30,000-$50,000 81,347,929 79,845,718 -1.85
$50,000-$74,999 116,752,274 115,514,348 -1.06
$75,000-$99,999 110,669,935 112,622,052 1.76
$100,000-$199,999 221,305,821 241,709,256 9,22
$200,000+ 392,682,009 434,959,724 10.77

Clearly, by this measure, "tax cuts for the rich" have not shifted any burden toward the middle class. Of course, as I pointed out the other day, tax credits actually shift ultimate tax payments into negative growth. But who benefits? Well, here's the same table with each group's % of the total income tax burden:

2005 (%) 2006 (%) % change
Total 100 100 0
<$30,000 3.84 1.28 -66.55
$30,000-$50,000 8.52 7.93 -6.84
$50,000-$74,999 12.31 11.57 -6.07
$75,000-$99,999 11.67 11.24 -3.69
$100,000-$199,999 23.32 23.96 2.72
$200,000+ 40.34 44.02 9.12

So, contrary to Ian's logical progression, taxing the rich less has not raised the burden on other residents. In fact, excluding the credits — which are given, in a sense, for spending money on things on which the government would like people to spend money — the actual tax value of the top tier went up. The reason is clear: The over $200,000 group saw an increase of overall adjusted gross income (AGI) of 14.38%, but the average AGI of such households increased by only 5.63%, which means that the number of households in this category, paying at the upper tax rate, increased — 8.29% by the numbers.

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Yeah, Justin, but you're stating facts. What does that have to do with anything? Stupid liberals hate facts - it's what sounds good that is important.

Posted by: Mike Cappelli at January 9, 2009 9:49 AM

Mike's right Justin, it's not all about the facts but rather how do you FEEL about the facts.

Posted by: bobc at January 9, 2009 2:05 PM

The facts are that unemployment has not been so high since Clinton was sworn in as president, and another Bush was leaving the White House.

Posted by: OldTimeLefty at January 9, 2009 3:13 PM

Justin your characterization is misleading. The charts you are do not say what you are claiming they saying. For example, what you fail to highlight is that the income for the bottom tiers went down substantially, while the incomes at the top rose dramatically. So even though people earning over $200k saw their collective taxable income rise by over $700million, their tax burden fell by $659,195.

By they way, the document you cite shows that there was an increase in tax filers of 5541. so much for the argument that we are losing tax paying population.

Posted by: Pat Crowley at January 9, 2009 4:09 PM

Tax "filers" does not mean tax payers.

Nearly half the population doesn't pay anything in income taxes at all.

Honestly, how many people are left in Rhode Island making over $200,000 a year? If they are smart, they'd already have changed their residency to an income friendly place like Florida. It's hard to "soak the rich," when they are sitting under an umbrella on a sunny beach in another state.

Posted by: Will at January 9, 2009 5:10 PM

Yeah, income tax-free Florida, exactly why it would be understandable if someone forgot to pay their property taxes too.

Whoops, did I just type that out loud?

Posted by: pitcher at January 9, 2009 6:18 PM

Pat can you cite a source for your claim that incomes for the lower income groups is falling? The federal data has been showing that their incomes are stagnant, as they are in the middle income groups. It’s the taxes that the lower income groups pay that is falling. The overall effect seems to be that after tax income in the lower income groups, in the lowest quintile, is actally increasing.


Posted by: Frank at January 9, 2009 6:26 PM


This post addresses the specific assumption by Ian that the tax burden is shifting down the income scale. My tables do indeed show that, when it comes to income tax, that assumption is false. Whether lower income households are making less money is a worthwhile question, but it isn't misleading to answer a question actually asked rather than the question that you would prefer to pose.

By the way, I addressed both of your numerical claims here. In sum, the only reason their tax burden fell (because their tax liability did indeed go up) was tax credits, and when it comes to tax credits as a % of actual taxes, the number for the under $30,000 group went from 18% to 265% from 2005 to 2006. For the over $200,000 group, they went from 3% to 15% over the same period.

Moreover, it's simply wrong to say "that the income for the bottom tiers went down substantially." Here the changes in average AGIs from 2005 to 2006:

<$30,000: -$229.70
$30,000-$49,999: $6.58
$50,000-$74,999: $54.99
$75,000-$99,999: $75.24
$100,000-$199,999: $644.32
$200,000+: $29.350.60

Now watch what happens when we double-count joint returns (to get a little closer to a per capita measure):

<$30,000: -$140.70
$30,000-$49,999: $511.53
$50,000-$74,999: $968.94
$75,000-$99,999: $692.64
$100,000-$199,999: $538.46
$200,000+: $15,459.53

I think what's happening, here, is that motivated families are leaving. The per-person average AGI presents a better picture because the fleeing families counterbalance (in a data sense) drops or stagnation in income.

Posted by: Justin Katz at January 9, 2009 8:36 PM

The question you ask is not necessarily the pertinent one. That you ask it may have some significance to you and your narrow view of the subject, but Pat's question and answer have much more meaningful significance. I know it's hard for you to get out of the way of your own ego, but we'd profit if you would try.

Posted by: OldTimeLefty at January 10, 2009 9:04 AM

Every post cannot and should not be a treatise on reality. Blogs are conversations, not tomes, and the way conversations work is via the accumulation of points made then proven, disproven, or put aside. To declare that a response to a particular point is "misleading" (as Pat did) because it only addresses the point itself or to leverage its limited scope for an ad hominem attack (as you did) is intellectually dishonest.

In Pat's case, I assess that he's deliberately reinforcing a rhetorical construct by which his side can extrapolate points as needed without reference to accuracy. That is, he wants to be able to take any fact in a particular set of data that serves his rhetorical ends (e.g., that the lowest income group of state tax filers saw a decrease in aggregate AGI) and present that as evidence of something that it does not support, but that serves his political ends (e.g., that "the rich" are transferring their "tax burden" toward lower income groups).

As for your own intellectual unfairness, my impression is that your accusation against me is actually an instance of projection.

Posted by: Justin Katz at January 10, 2009 11:07 AM


A technical watch out. Federal tax data is based on the zip code on the return. However, the fact that RI shows a rise in high income federal returns does not mean this income is available for taxation in RI. Given the proximity of RI to CT and MA, someone who moves to RI and takes a $250k job in Boston would show up in the federal data as RI, even though most of their state income tax would be paid to MA -- with RI getting just the difference in marginal rates, if there was one.

Posted by: John at January 10, 2009 11:31 AM


I'm aware of the varying applications of these sets of data. This particular discussion had to do with Rhode Island's tax burden, making the state-level data more relevant.

I'd note, though, that all income is declared on RI tax returns, so the AGI is relatively accurate. The state of RI then gives a tax credit for taxes paid to other states (because earned in them), but RI does take a cut.

Posted by: Justin Katz at January 10, 2009 3:43 PM
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