in brainpower!

There really should be a chapter in a textbook somehwere on this one! Perhaps in a graduate statistics class.. http://www.irs.gov/pub/irs-soi/04in06tr.xls. It's an excel file from the IRS showing historical tax data from 1986 through 2004. You really do have to click it and get this file! Yes, get it in another window and reference it while reading this page...

This excel file is why I have the statement “statistics lie” in more than one place on this web site. In fact, this is probably the most absolutely wonderful, incredibly beautiful example of twisted statistics I have ever seen. I want whoever made this spread sheet working for ME!

This file quite clearly shows income going up, up, up... It also shows the top 1% getting taxed more and more and more.... And it shows us, the bottom 99%, getting taxed less and less and less... In fact, it shows both our percentage of total taxes, and average tax rate going down and down and down... Well, that's all just fine and dandy, right? Great news!!! Just what we want to see! Nothing wrong with the tax system at all.... That is, indeed, what it appears to show at first glance, and second glance, and even third glance. Problem is, that this just doesn't jive with all the other numbers, charts and statistics I've seen. It just doesn't add up. It took me a while to figure out why... It all depends on exactly what you display, and how you display it.

Conveniently, the table does not directly display the top 1%. Nor does it display the bottom percentages. This helps hide income disparities. 20% of the US lives in poverty. Can you see that from this table? I can't. What is the tax rate on the top 1%? Can you see that? I can't either.

The table also choses to show cumulative group averages instead of individual income groups. Again, this helps hide income disparities. But it also twists the average tax rate numbers by making them look much smaller. For instance, the bottom 99% in 2004 paid an average of 9.43%. Not bad, eh? That's average, over all income levels except the top1%. Makes it look like the middle and upper-middle classes are paying just 9.4%, doesn't it? It hides rather well the fact that the high earners are getting creamed at 35%. It would be really nice to see this table show each individual 5% group, and the rate they pay. Why doesn't it? Well, because you'd really be annoyed to see that you're paying 35%, and that top 1% is really paying 20% or less.

The next step after seeing that the bottom 99% is paying 9.43%, that we instinctively want to take, is to look on the same line to see what the top 1% are paying... to make a comparison. Well, that number is just not there, so the closest thing we can find is “total income tax share”, which looks to be about 40%. Hmm... 9.4% compared to 40%. Gee, that top 1% is really getting hit hard... No... Apples and Oranges! They make over 100 times the money you do (at least, and that's adjusted income!). The tax percentage data is not available from this chart. It just won't tell us.

Income is shown going up up up... because the total income numbers are not inflation adjusted! Nice touch, eh?

The table shows “adjusted gross income”. Seems fair enough. But no... if you look at your tax forms, thats after all the deductions. That top 1% has many many more deductions than you do, for the sole purpose of keeping them there in the top 1% and to keep them from paying taxes! Personally, I'd like to see absolute income, before deductions. In fact, most of the top 1% have income that isn't even counted as income and doesn't even show up! There are just oodles of ways to (legally!) hide massive amounts of income from the IRS. You would be truly shocked if you knew...

The table shows the bottom 99% getting a larger share of the income pie. Well, we know that's not true, so why does it show this? The paragraph above, of course. You're not allowed to subtract as much from your income. The number and amount of deductions for that top 1% just keeps going up. That makes them look poorer.

The table shows all the bottom groups paying less and less of the income tax pie. That's nice! Again, it's not real though. Why? Well, first off, we're making less money. Average worker pay has gone down! That is not displayed in this table. So, of course our share of the tax pie has gone down. We just don't have it to pay it. And that, of course, is why you see the top 1% apparently paying more of the income tax pie. They should! What you cannot see however, is that they really should be paying a lot more. The income (inflation adjusted) for that top 1% has actually increase by about a factor of two. Yours did not.

The table does not show the real tax rates that we're paying. For instance, it does not display any information relating to those who are lucky enough to keep getting raises. Those folks are paying into higher and higher tax brackets because the tax rates have not been adjusted for inflation. Conveniently, the table displays the data so that cannot be seen. They may be movin'-on-up, but after taxes and inflation, they're really just treading water. The rest of us are getting laid off and taking lower paying jobs.

And lastly, of course, the table doesn't show anything to do with wealth accumulation. This is where real income can be counted... the change in your net worth from year to year. Did your net worth change? Probably not. You spent everything you earned. In fact, most Americans are currently running in the red. That top1%, however, doubled their wealth over just the last few years. But, that's not counted as income!

Even Warren Buffet (the famous investor) came out the other day and said he paid 17% on over $46 million in income, while his employees, making over 200 time less, were paying 35%. If that's not bad enough... do you really think Warren Buffet only made $46 million? Oh hell no. Like I said, that's only what the IRS counts as income. Warren probably paid an effective tax rate of less than 2%. Most of the actual real income isn't even counted.

And why only data to 2004? It’s now mid 2007!

There's probably yet more miss-information in this table... but by now you're getting tired of reading, and I'm rather bored with poking holes in it. It is, in fact, just an absolutely wonderful example of what a clever person can do with statistics. The unfortunate part, is that most people simply are not smart enough to figure this out. You're lucky. I've done it for you. Remember this page if anyone brings up that nasty little spread-sheet again....