26
Sep
11

That wet popping sound you just heard…

…was Andrew Sullivan’s head exploding:

Stroup looks at changes in the tax burden between 1986 and 2004 — the latter being the year after the Bush tax cuts took effect — under a wide variety of metrics.  It’s a short PDF, and you should go read it, but I’ll excerpt a few things:

Critics complain that the 2001 and 2003 Bush tax cuts gave the greatest tax relief to the wealthiest taxpayers. However, every major tax bill over the past 15 years — both Republican and Democrat — has increased the progressivity of the federal income tax system.

[…]

From 1986 to 2004, the total share of the income tax burden paid by the top 1 percent of income earners grew from 25.8 percent to 36.9 percent. During the same period, the total share of the tax burden paid by the bottom 50 percent fell from 6.5 percent to 3.3 percent.

[…]

Since the 2001 and 2003 Bush tax reforms, the share of total income received by the wealthy has increased; however, their share of the total tax burden has increased even more than their income share. In other words, Bush’s reforms have helped mitigate the income gap between rich and poor by increasing the progressivity of the income tax system.

I’m not willing to bite on this just yet — there are an awful lot of things going on in that short paper, and I don’t have the policy-wonk background to tell whether any of the statistics cited raise red flags for the analysis.  Mostly I’m linking to it simply because it ought to stir up a lot of shit.

Hat tip to David Henderson, who notes that

Stroup, like almost everyone who writes about these issues, conflates income and wealth. He refers to poor people and rich people, but has no data on wealth: all his data are on income.

The common theme on EconLog over the past week or so has been that income and wealth are strongly correlated, but nowhere near synonymous.  (I look forward to one or more of them writing about the decorrelations: My guess is that the vast majority consist of high-income people pissing away a lot of money, but it would be interesting to hear about low(er)-income people who’ve nevertheless managed to accumulate substantial wealth.)

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1 Response to “That wet popping sound you just heard…”


  1. September 26, 2011 at 15:26

    I can give you an example of where income and wealth don’t correlate within my own family:

    Both my father and one of my aunts are around the same age (~50) and both have been teachers.

    * My father has been generally disinclined to work within the system and has been prone to decide to head off and do outdoor ed for a while, then leave that and do relief teaching, or move to a different town and teach there. As a result his annual wage would have rarely reached the Australian average, and generally it would have been much below it. Also for over a decade of his adult life he had been the primary wage earner in a family of five, and now that he’s not supporting a family he only works part time so currently he’s probably earning about 30% of the Australian average.
    * My aunt in comparison dutifully worked within the education system getting raises and promotions to the extent that her current wage would be about 60% greater than the Australian average. For around 15-20 years she has also been supporting a family, but of only one foster child and a few cats.

    Including houses, shares, and superannuation (compulsory aged pension investment; think social security except invested in actual investment accounts, chosen by the individual) I’d estimate my parents assets as around half a million between them, while I expect my aunt would only have around $200,000. (note that both these estimates exclude the portion of their houses that is still owned by the banks) This is mostly due to much better housing and share investment and much less frivolous spending habits.


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