David R. Henderson  

The "Courage Campaign's" False Statement

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In my state of California, the so-called Courage Campaign is pushing for higher tax rates on high-income people. California now, by the way, has one of the highest top marginal tax rates on income in the country: 10.3 percent. To push for an even higher marginal tax rate, the Courage Campaign has put together a video in which it tries to shame Kim Kardashian. Now I hold no brief (pun not intended) for Ms. Kardashian, but I do defend her right to keep what she has earned. More important, even if I didn't defend her right, I think it's important for people who want to tax her more to be accurate in their statements. The following statement that goes with the video contains a false statement:

Kim Kardashian made more than $12 million in 2010, but she only paid 1% more in taxes than a middle-class Californian.

Note, by the way, that they're talking only about income taxes. It is true that middle-class families pay a higher percent of their income in sales taxes. But that's not what they're discussing.

Let's see why it's a false statement:
. If their $12 million income for Ms. Kardashian is correct, and if their $47,000 number for a middle class California family is correct, then Ms. Kardashian pays about $1.2 million in income taxes and the middle class family pays about $2,000 in income taxes. Is that 1% more? No. It's about 59,999% more.
. Ah, but maybe they were talking about tax rates. OK. So let's say the middle-class family pays an average tax rate of about 5%. Her average tax rate is about 10%. So that's 100% more.
. OK. Maybe they were talking about percentage points, not percents. Fine. Her average tax rate of 10% is five percentage points more than that of the hypothetical middle-income California family. 5 does not equal 1.
. So maybe they were talking about percentage points and marginal tax rates, not average tax rates. OK, so let's look at that. Ms. Kardashian's marginal tax rate is 10.3%. This middle-income family's marginal tax rate, if it has zero exemptions or deductions, which is unlikely, is 4% if the couple is married, filing jointly or 8% if it's a single person. So her marginal tax rate is still 6.3 percentage points more (if we really are comparing it to a family), or 2.3 percentage points more (if we're comparing to an individual).

Elsewhere on its site is another false statement. The "Courage Campaign's" first statement here in support of the tax increase is that the measure:

asks Californians who make over $1 million per year to pay a little bit more

I leave finding the key false word in that statement as an exercise for the reader.

Does the Courage Campaign Have the Courage to Tell the Truth? We Shall See.

HT to William McGurn.


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CATEGORIES: Taxation



COMMENTS (17 to date)
Sol writes:

Could the 1% be solely referring to percentage points of Cal. state income taxes?

David R. Henderson writes:

@Sol,
To get an answer to your question, read my post.

Matt writes:

So the numbers you use only deal with California state income tax? Not sure if you want to do all the work, but what would the numbers look like if you included federal?

Andrew writes:

I sure hope your key false word is "asks". Asking implies that someone can say no.

mobile writes:

The claim in the video is that a middle class Californian's (marginal?) tax rate is 9.3%. For 2011, this rate applies to single or married-filing-separately households on taxable income between $48,029 and $1,000,000. (For 2010, this top marginal rate is 9.55%, not 9.3%)

mobile writes:

Which is to say, that the numbers do work out if

  • you use 2011 tax rates, not 2010
  • you are comparing marginal tax rates -- i.e., tax rates on the last dollar earned
  • the middle class household being used for comparison is a single person
  • that's person's taxable income (gross income minus deductions) is $48,030, not $47,000
David R. Henderson writes:

@Andrew,
Correct.
@Matt,
I don’t want to do all the work. But I don’t need to, for two reasons. First, their claim was about the California income tax system. Second, because the federal income tax system is even more “progressive” than the California state system, the results would be even starker.
@mobile,
Correct. Their claim would be correct if they had made a different claim. I was discussing the one they did make.

Jody writes:

Personally, I respond to these sorts of things with the OECD study that shows that the US already has the most progressive tax system.

Source: http://dx.doi.org/10.1787/9789264044197-en

p. 104: "Taxation is most progressively distributed in the United States, probably reflecting the greater role played there by refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit."

p. 106: "Based on the concentration coefficient of household taxes, the United States has the most progressive tax system and collects the largest share of taxes from the richest 10% of the population

Torsten Munkov writes:

What sad and maggot infested brains these activists must have. They call it courage to vilify a rich young woman. One of many the Moloch state violates all privacy and decency to incite harm and prosecute its lunatic War On the Rich.
They are a false charity undeserving of being tax exempt when they would better be classified a terrorist organization.
It is not courageous to join the public and private cabal of terrorists who have hijacked our constitutional republic.

Paul Sand writes:

That "asks" thing has always been a blood pressure-raiser for me. People who speak or write those words are not only being dishonest; they're also betraying their contempt for their audience's intelligence. A twofer.

President Obama says it a lot.

Foobarista writes:

I suspect government unions are funding this "grassroots" organization. They are famous for these sorts of stunts.

Brandon Berg writes:

I guess this is just semantic quibbling, but I believe that the correct word to describe the quality needed to demand that someone else pay more taxes when she's already paying orders of magnitude more than you is chutzpah, not courage.

Devil's Advocate writes:

Do we know what amount Ms. Kardashian actually paid...or what percentage (actual tax payment/$12 Million)? Is it possible to think that rates may be adjusted to compensate (no pun intended) for deducations and/or savvy tax lawyers? After all, didn't GE pay very little in taxes regardless of corporate income levels?

David R. Henderson writes:

@Devil’s Advocate,
Good question and good point. We don’t know. I was just taking them at their word that they did know, but, given how badly they misinformed on the other part, they could have easily been wrong here too.
To your larger point about savvy tax lawyers, I have a friend or two who make about a million a year in good years--which, I admit, is not Kim Kardashian level--and their not finding such deductions or tax lawyers is for no lack of trying. The simple fact is that it’s very difficult for high-income Americans to avoid heavy taxation.

DavidinOC writes:

While "asks" is the single undeniably false word in the statement, "little" is also questionable. If I understand their proposal correctly, they will raise the marginal tax rate to 13.3% for income between $1M and $2M and to 15.3% for income over $2M. For a $12M income, that means "little" = $530,000!!

David R. Henderson writes:

@DavidinOC,
Good point. Thanks.

Ken B writes:

'asks', 'little', and 'more'.

Why 'more'? Because next year they will calculate

Kim Kardashian made more than $12 million in 2011, but she only paid 1/2% more in taxes than a middle-class Californian
and the future 1/2% is less than the current 1%.

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