David R. Henderson  

Bruce Bartlett's Mistake

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I wrote on Friday:

Bruce's bottom line may be right, but there's something fishy about these numbers. Start with the fact that the median income for the whole country is at or around the bottom end of this bracket. That means that there are fewer people at, say, $90,000 than at, say, $60,000. So the average in this $50K to $100K bracket is likely to be no higher than $75K and most likely lower. Is it really plausible that the average taxpayer deduction is over $26K?

It gets fishier. Look at the medical deduction. To take that, you must have out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income and you can take only the portion that exceeds that 7.5%. Most people in this income bracket will, therefore, get a big fat zero for the medical deduction. It's highly implausible that the average is over $7,000. With all the zeros, I would expect the average to be under $2,000 and probably well under.

I suspected that the average was simply for people who took the medical deduction. My suspicion was confirmed. Here's a link that explains that fact for data from 2010. HT to Mike Davis of SMU for this link.

The medical deduction number for people with income between $50K and $100K, at $6,690, is similar to Bruce's $7,269. Notice the statement:

Also, note that these averages take into account only those individuals who claimed an itemized deduction for that type of expense.

So with, I would bet, over 80% of taxpayers taking a zero deduction for medical, for reasons explained in the previous post, the average would be under $2,000.

The Wall Street Journal editors also weighed in on this. They don't give a comparable income category. Theirs is $75,000 to $100,000. But they base their numbers on IRS Statistics of Income, which is, recall, what I said Bruce Bartlett should have used.

One would expect, and I'm virtually positive that it's true, that people in this income category have higher average deductions than people in the $50,000 to $100,000 category. The average deduction for people in the $75K to $100K category who itemize is $22,171, well below Bruce's alleged $26,424 for the $50K to $100K income group.

So what happened? Bruce Bartlett cherry-picked and added up numbers that shouldn't be added. Recall that he wrote:

According to data released earlier this year, taxpayers who declared between $50,000 and $100,000 of income in 2009, claimed, on average, $7,269 for medical expenses, $6,247 for taxes, $10,133 for interest and $2,775 for charitable contributions. That sums to $26,424 - well above both figures Romney has put forward.

If his first statement were true, then he should add. But it isn't. Taxpayers who itemized claimed on average much less in medical and, for that matter, less in interest and charitable than those numbers. Again, Bruce forgot to include those with zeros in the various categories.

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CATEGORIES: Tax Reform , Taxation

COMMENTS (1 to date)
Lance writes:

It's also important to note the low number of taxpayers who itemize their tax returns (a little under 30%): http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3549

And the average taxpayer who would reach the proposed cap are within the top 10% of income. There are individuals in much lower tax brackets who would reach the limit, but they are a small percentage of a small percentage (and likely have no taxable income after the $25k deduction and personal exemptions).

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