Muddy Brooks
David Brooks made an important mistake in his Tuesday column about Barack Obama's fund raising. He writes: "If Obama's tax plans go through, those affluent donors could wind up giving over 50 percent of their income to the federal government."
According to the non-partisan Tax Policy Center's analysis of Obama's tax plan, the correct share for the richest 1 percent of households--those with income above $600,000--is 36 percent; for the for the richest 0.1 percent, above $2.9 million, the rate would be 39 percent. Note also that since these estimates include taxes remitted by corporations, the actual tax returns that these households fill out would find them paying less than 30 percent of their income in taxes. Even with Senator Obama's proposal to raise Social Security taxes on those with earnings above $250,000, a proposal for which he has yet to specify a rate, tax liabilities of the affluent would still be far below 50 percent of their income.
It's also worth noting that these tax rates for those at the top of the scale are about the same as those that prevailed under Bill Clinton's presidency (average for the top 1 percent, 1993-2000: 35 percent), a period of strong and broadly shared economic growth.
As long as we're on the subject, in a better world, the findings from the TPC report would squelch the anti-Obama chatter around his tax plan vs. McCain's. In that distortion chamber, the fact that Obama raises taxes on families with incomes above $250,000, and only on those families, morphs into a big tax increase on the middle class ($250K and up gets you in the top 3-4 percent, by the way).
The report (compare tbls 1 and 6), in fact, clearly shows how topsy-turvy that critique really is. Obama's middle-class tax cut, about $1,000, is three times that of McCain's, about $300. Obama cuts the taxes of 81 percent of families; McCain, 56 percent.
And, as if the biggest economic problem facing America today is that rich people don't have enough money, McCain amps up the Bush tradition of saving the biggest tax cuts for the wealthiest families. That top 0.1% group noted above gets a $270,000 tax cut under his plan.
Brooks' mistake on the tax rate, however, is really just an aside in the article, which was an evaluation of Obama's donor base. Mark Schmitt, a deep dude often spotted in our café, and now the editor of the American Prospect, shared some trenchant analysis of what's wrong with the rest of Brooks' piece.
As if he's caught Obama in a lie, Brooks writes: "When he is swept up in rhetorical fervor, Obama occasionally says that his campaign is 90 percent funded by small donors. He has indeed had great success with small donors, but only about 45 percent of his money comes from donations of $200 or less."
Mark points out that this isn't that complicated: 90 percent of his donors contribute less than $200 and they account for 45 percent of the money. To get that large a share of small donors contributing that much money, Schmitt recognizes, is totally unprecedented.
Brooks then ticks off the tony occupations of Barack's biggest donors, and concludes that "the real core of [Obama's] financial support is the rising class of information professionals." But since smaller donors are not required to provide occupational information, they don't figure at all in Brooks' analysis of the bucks flowing from commercial bankers and hedge funds managers. As Mark concludes, when Brooks is waxing about the dominance of the privileged-class donors, he should be clear that they account for only about 10 percent of total donors. Schmitt: "In fact, all the categories he identifies, including 'professors and other people who work in education,' amount to less than 20 percent of Obama's total of $290 million."
Go, Mark. Stop, David.
And correct me if I'm wrong but those are marginal tax rates. At the 36% level, someone would be paying 36% of each dollar earned above whatever point the bracket kicks in. That's a big difference than 36% of all income. In fact, that would be a flat tax which I'm sure we would have heard about if Obama had proposed that. So Brooks is wrong on at least two points.
July 1, 2008 11:24 PM | Reply | Permalink
True. There's a big difference between gross income and taxable income.
July 2, 2008 12:24 AM | Reply | Permalink
Yeah, but for someone with an annual income in the millions, it's the marginal tax rate that matters: they'd pay 28% for the first hundred thousand, and 36% for the next nine million, nine hundred thousand, for an actual tax rate of 35.99%
July 2, 2008 11:35 AM | Reply | Permalink
Actually 35.92% unless you're using Rove's The Math.
July 2, 2008 11:42 AM | Reply | Permalink
calling it a mistake makes the mistake of assuming that brooks actually cares about the facts let alone the truth. it would be more accurate to call it a lie.
July 1, 2008 11:26 PM | Reply | Permalink
I think raising the upper limit of the payroll tax is, and will be perceived as, a small step towards correcting a gross unfairness, not to mention an economic stupidity: a tax on jobs.
I think Obama should go further, and remove the cap altogether. The feds get 100 times more social security revenue from a 100 people making $100K each than from 1 CEO making $10 million. How is this fair?
And for what reason is investment income exempt?
The extra income could be used to lower or eliminate the employer's contribution to social security -- a true tax on jobs -- which would neutralize charges of a tax hike and win the support of businesses, especially small businesses who don't have $10 million CEOs.
July 2, 2008 12:19 AM | Reply | Permalink
There is a limit on the amount of earnings taxed for Social Security because there is also a limit on the benefits. Someone earning $500,000 in the last years before retirement gets the same SS benefits as someone earning $102,000 (or whatever the cap is).
Social Security has always been primarily a mandatory pension plan, not an income redistribution program. The payout is supposed to be somewhat commensurate with what was paid in (although lower-income participants get a better "return" at present than high-income contributors). If income above $250K becomes subject to FICA, will benefits also increase above that level? If not, FICA becomes more of a transfer tax and less of a pension funding mechanism.
July 2, 2008 7:41 AM | Reply | Permalink
It is dressed up as a pension plan, but in reality it is a redistribution plan, from workers to retirees. Conservatives love to point this out when the issue is how to gut social security. Only when progressive reforms are suggested do they drop the fiction and act as if it really is a pension.
In fact, the fundamental purpose of Social Security is insurance, and the whole point of insurance is to redistribute resources from a large pool of people at risk to those who end up on the losing end of that risk. True, the risk of a $10 CEO becoming destitute on depending on social security to live is vanishingly small, but it is not zero. It doesn't strike me as unfair, unsound, or politically unwise to impose a flat tax on everyone's income to pay for what is in effect, and should be, a universal safety net.
July 2, 2008 9:20 AM | Reply | Permalink
I agree with mash. The frame that Social Security is a pension plan may be dominant in the media and the minds of the public, but it isn't really true.
If you want to argue for "privitization" and for putting these tax dollars into the stock market, then you have to frame the program as a pension plan. That's how the right has played this.
But the real point of Social Security is to ensure that none of us ends up completely destitute in our old age -- to provide a rock bottom income on which we can subsist, should the worst happen.
Yes, benefits are calculated based on our lifetime contributions. That is a (perhaps unfortunate) concession to the right, who are always bent out of shape about "freeloaders" possibly "gaming the system".
But mash is right -- Social Security is really an insurance program, at its core. And, as such, it's perfectly fine for the well heeled to pay in more than they can expect to get back. I think we have to start saying that more openly.
Besides, there is no trust fund. Period. Full stop.
It's all tax money. It all goes into one pot, and it all gets spent (and then some). We need more of it coming in now, if we're going to pay out what we say we're going to pay out in the future.
-- ARG
July 2, 2008 10:47 AM | Reply | Permalink
And more people end up losing out. Sharp professionals in the prime of life can't beat the S&P 500, why should we expect retirees?
My father retired with the option of taking a nice lump sum pension as opposed to an annual payment.
The financial advisers told him it made better sense to take the lump sum. Then they told him it was better to take invest then to buy an annuity. He went with a stock broker from Merril Lynch that everyone else retiring at the time went with. That broker managed to get more and better healed clients then my father.
That stock broker placed my father in Merril Lynch's 'far east mutual fund'. When the Pacific Rim economies began to collapse in 1997, he kept my father in it. ML wanted to prop up the fund even as the investments were funding - they didn't do this with their truly rich customers - my father played the sap.
Other mistakes continued, especially as my father's mental abilities declined. Eventually my mother saw what was happening, and stepped in, took over and stopped the bleeding.
My parents now, own their own small home in Arizon, have a small cash cushion left, and basically live off of Social Security now.
The odd thing is, everything good that they've gotten in life is the result of liberal policies, yet that they are faithful watchers of Fox news and never fail to vote Republican every chance they get.
July 2, 2008 2:11 PM | Reply | Permalink
apparently, punditing is HARD.
July 2, 2008 12:36 AM | Reply | Permalink
Despite his acumen, Brooks occasionally lapses into delusion as he desperately clings to the dream of his GOP retaining power.
About the only guy on the right we can trust to write honestly has let us down.
July 2, 2008 1:04 AM | Reply | Permalink
Jim -
I'm sorry Jim but I think our Mr. Brooks has been a shill for the wealthy for a long time. The Daily Howler website has a searchable repository of media analysis. Check it out and you'll get informed on our Mr. Brooks.
You will notice throughout history - shills like Mr. Brooks doing favors for the wealthy by sticking it to everybody else.
He's all patronage and propaganda.
July 2, 2008 6:52 AM | Reply | Permalink
In my opinion, Brooks is ten percent acumen and ninety percent BS. He also appears to have a great talent for believing his BS.
Brooks is a fundamentally dishonest person.
July 2, 2008 9:10 AM | Reply | Permalink
bobo gets his facts wrong, where have I heard that before
face it, what bobo has AIN'T facts
if bobo ever gets it right, that would be news
July 2, 2008 1:11 AM | Reply | Permalink
How about writing these with a different POV than, "Those scurrilous liars are accusing Obama of wanting to tax our precious rich!!1!!"
The top marginal tax rate in 1955, under than notorious Leninist, Eisenhower, was 91.5 Percent. Raise taxes by a bunch, on the rich, to pay for Baby Bush's budget-breaking War making.
See? Was that so hard?
July 2, 2008 1:13 AM | Reply | Permalink
Well, if Obama applies the same rate that people pay on the first $102,000 of their income today, which is 12.4% (adding the employer and personal contributions), then the top marginal rate will be 39% + 12.4% = 51.4% -- a little over 50%.
Of course, it's not clear that he will apply such a high rate, and Brooks is wrong to claim that any significant number of people will be paying over 50% as a portion of their total income; it's only the top marginal rate. (Once you include various deductions, I doubt that anyone will actually pay over 50% total.) I agree with you that Brooks exaggerates the portion of Obama's funding that comes from specific professional categories, and I am very much in favor of the Obama plan in general. But the federal marginal rate could be much closer to 50% then I think your post indicates...
July 2, 2008 1:16 AM | Reply | Permalink
Brooks comment was about average rates, not marginal rates, as in your comment--I also am citing average rates. Average rates are tax liability/income. In a system with graduated marginal rates, the average is usually lower than the marginal (unless we're talking megabucks, where they're going to be about the same).
Also, it's important to recognize that the BHO campaign has not specified the Soc Sec rate for those with incomes above $250K. They--or Congress--could easily choose a lower rate, maybe on a broader base than just earnings.
July 2, 2008 9:18 AM | Reply | Permalink
You are talking about two different things here. Payroll tax which is social security and Medicare and Income tax which is the tax that you pay on income. Adding social security into the mix is not honest. Social Security is a type of retirement plan, I know people don't get that but but basically it is. Adding it in would be like saying that contributions to you 401k or 403b are taxes.
July 2, 2008 10:21 AM | Reply | Permalink
No, that's not correct. If you're going to add the employer contributions to the tax rate, you have to add it to income also. So, it would be 51.4% of 106.2%, or 48.4%. And people don't pay the marginal rate on their entire income.
July 2, 2008 2:19 AM | Reply | Permalink
Good catch. That's very true, and I wasn't thinking.
July 2, 2008 2:39 PM | Reply | Permalink
Before the internet, incompetent shills like Brooks could get away with this kind of lying, but now they're ridiculed before the paper hits the newstands. Like the print newspaper, Brooks and his no-talent, no-ethics ilk are headed for extinction.
July 2, 2008 2:26 AM | Reply | Permalink
Bingo.
July 2, 2008 3:06 AM | Reply | Permalink
"About the only guy on the right we can trust to write honestly has let us down."
Who is that guy, Wyo Jim? I never heard of him.
July 2, 2008 3:02 AM | Reply | Permalink
Matt Ronglie
Note that Brooks claimed that average (not marginal) tax rates for the rich would be over 50%.
Now Brooks can be saved by the weasel word "could" which could be interpreted so his claim could be true. For example under the Obama plan, if affluent Obama donors make a huge error in the IRS's favor, they could pay more than half of their correctly stated income. Your explanation of how it could happen is roughly equally likely (will probably happen to more than one tax payer but probably not to many).
FICA is charged only on labor income . For the very rich it is charged on about very roughly half of income (they have a lot of "business income" some of which is FICA taxed and some of which isn't).
This means that the marginal tax on, say, wage and salary income of someone who makes over $250,000 in labor income might be close to 50% (slightly below as noted by TPMreaderHG) but the average tax rate will be well below.
When you get to people super rich enough that the lower tax rates on family income up to $250,000 and personal labor income up to $250,000 don't matter much, you get to people who have substantial capital income, which is not taxed by the social security administration.
There might not be a single tax payer owing close to 50% under the Obama plan. Certainly there won't be a large number of them. There are very few people for whom labor income over $250,000 a year is a large part of their income but both labor income from $ 102,000 to $ 250,000 and capital income are small parts of their income.
July 2, 2008 4:30 AM | Reply | Permalink
Brooks is desperate to interpret away the obvious story, which is the defection of large segments of the business community from the Republican standard.
They're the ones who have to live in the reality which Brooks only sees as grist for his tales. No surprise that they respond to it as it is. A similar remark may be made about the military.
This reminds me of Brooks's claim a few years back that a distinction between 'word people' and 'number people' explained the rejection of Cheney-Bush in the intelligentia: apparently the universities are filled with 'word people', incapable of rational thought. Among the universities he listed with hugely disproportionate faculty donations to the Democrats: MIT.
July 2, 2008 5:55 AM | Reply | Permalink
The real scandal is the declining tax rates on corporations. If we raised corporate rates to say 10% or more there would be enough money to fund a make over for the entire country.
July 2, 2008 6:19 AM | Reply | Permalink
You're missing the real bullshit in Brooks' analysis. He talks only in terms of dollars and not percentages. So he's discounting the huge percentage of additional donors which Obama has, and minimizing what percent of McCain's donors come from various groups. And of course he offers no analysis of where McCain's dollars come from.
July 2, 2008 6:51 AM | Reply | Permalink
Good point. The frame for these hacks is always about total dollars instead of mean estimates. Kinda like between me and Bill Gates together, we're super wealthy!
Do very wealthy pay more in dollars? Yes.
Why? We tax dollars instead of people.
Why so? 'Cause that's where the money is!
July 2, 2008 8:33 AM | Reply | Permalink
In particular, Brooks talks about donor occupations in terms of absolute dollars without regard to the fact that Obama has raised about 2.7 times as much money as McCain. So a profession can have donated more money to Obama, but unless they donated more than 2.7 times as much, they can't honestly be described as having more influence (masterfully explained in detail by Jesse at Pandagon.) For five of the eight categories of supposed "elites" that Brooks cites, this is not true.
It is left as an exercise for the reader whether Brooks is incapable of understanding simple arithmetic, or is deliberately being dishonest to pretend that Obama is the one supported by "elites." (Hint: "Both" is also an acceptable answer.)
July 2, 2008 1:05 PM | Reply | Permalink
Some years back, during the Clinton years, I was watching Repub Dick Armey on C-SPAN. He was in the well of the House babbling about taxes and made the claim that "people" will be paying over 50% of their income in taxes. Even if he was accurate, he never said which "people." He also never said whether or not he was including ALL takes, Federal, State, Local.
I decided to take a look at our taxes. I was retired with SS and a small pension, my wife had a small job with the School District. We had some capital gains, interest and dividends, but no consumer debt, so we had no use for Itemizing on a long form. We took the Standard Deduction, 2 Dependents, on Adjusted Gross Income of $63,000.
Out tax on that 63K AGI was 11%.
July 2, 2008 8:42 AM | Reply | Permalink
July 2, 2008 8:50 AM | Reply | Permalink
You're asked to provide it because the campaign is required to report it if you make multiple small donations that add up to more than $200, if I remember correctly. This is to keep contributors from evading limits by breaking up their donation into smaller amounts. But if you don't go over that limit, the campaign is not required to report that information.
July 2, 2008 12:46 PM | Reply | Permalink
Mm. David vacillates between coherency and shill and always has. I think it's because his function (on PBS, etc) is to look reasonable to moderates so he can pitch the soft sell. No matter how he tried to sell it, however, his product still sucks.
July 2, 2008 9:44 AM | Reply | Permalink
David Brooks is Robert Novak with a smile and better hair!
July 2, 2008 10:08 AM | Reply | Permalink
Something like half of all Brooks' columns for the past few months have been diatribes against Obama. There are very few weeks when he doesn't lob another bomb his way, usually with little regard to the facts.
Par for the course for the R's noise machine, but one has to wonder how long the New York Times will allow its editorial page to sponsor a free weekly Republican ad.
July 2, 2008 11:05 AM | Reply | Permalink
pdq_
the same New York Times that gives Bill Kristol a regular spot on its op-ed page.
July 2, 2008 12:44 PM | Reply | Permalink
Brooks was trained as a sociologist but he seems so lazy he doesn't even get his Applebees allusions right. If you stop and think about it the guy seems fixated on where Americans go out to eat, establishments he's never even apparently entered.
With that in mind you can't expect to him to do any actual research on tax policy when he can just reword the Heritage Foundation or Norquist crap that floats into his email box. That would take time out of his busy day thinking up snappy rejoinders to fling back at Mark Shields on the Newshour.
It's a shame too because there won't be any snappy rejoinders or columns about chain restaurants in 10 years for him to write if we don't fix this country. He'll have to resort to writing about our affection for soup kitchens and plucky American children scouring garbage dumps for scraps.
July 2, 2008 11:29 AM | Reply | Permalink
Might Brooks be including State and Local taxes in his average rate? Say a taxpayer with an annual income of $50,000,000 lives in New York City. His average federal rate would be close to 39%. Add in the New York State tax, and the Manhattan tax, and you get another 13% or so. Bingo--over 50% in average taxes paid.
July 2, 2008 11:40 AM | Reply | Permalink
If people like Brooks coun't dissemble they would have little, or nothing, to say.
July 2, 2008 12:35 PM | Reply | Permalink
My favorite part of the column was where he claims that professionals like lawyers and media types, who tend to donate and vote Democratic, "get their values from competitive universities and the media world," while corporate managers, who tend toward the Republican party, "get theirs from churches, management seminars and the country club." Putting aside the sweeping generalizations offered as unassailable fact, I find it hard to believe that "the media world" apparently doesn't affect the values of Republicans and Democrats don't do church. In Bobo's world, Republicans don't watch tv or go to movies and Democrats are vampires. But who am I to quibble with a sociologist of Brooks' standing?
July 2, 2008 12:54 PM | Reply | Permalink
Seems to me there are two ways to argue this.
One is to quibble with the details of the plan and whether it really amounts to a tax rate of over 50%m for anybody.
The other would be to say, "50% -- sounds pretty reasonable to me! Or would you rather have it be 90%, as under Eisenhower, or 70% as it was under Nixon?" (Or whatever the correct numbers would be -- I made these numbers up, same as Brooks).
The point is that we could challenge Brooks (and others of his ilk) on the unspoken point that 50% is too high. Is it? Why? What is magic about 50%?
Will these people stop working if their tax rate goes above 50%? Super rich people? Who aren't really "working" all that hard anyway? Really? You think they'll all stop "working"? Would that be bad for our country? Really?
I'm serious. Somebody making $1M per year is making an astronomical salary, no matter how hard they have to work. (It's not like they're putting in 3,400 hours per week at minimum wage!) Would the higher tax rate be a dis-incentive for them to "work"? Would the economy suffer from lost "productivity" if they decided to stop, or cut back?
I say, screw 'em. Let's make it 60% for the very rich.
-- ARG
July 2, 2008 2:13 PM | Reply | Permalink
"Super rich people? Who aren't really "working" all that hard anyway? Really? You think they'll all stop "working"? Would that be bad for our country? Really?"
Please. I wish most of these people would stop "working."
July 2, 2008 6:50 PM | Reply | Permalink
@ mash
Wrong.
It's a mandatory pension plan funded as if it were life insurance. The winners are those who live long enough to collect. Originally, that amounted to something around 5% - 17 workers paid for each retiree.
It was NEVER meant to be a redistribution scheme. That was SPECIFICALLY stated when it was first passed. It's purpose was to ensure that no old working people would be left destitute.
Because the retirement age was not raised to compensate for longer life-spans, and because benefits were increased without thought of funding, - the usual populist crap - the program is now in trouble.
July 5, 2008 12:05 PM | Reply | Permalink
The Atlantic had an article on Obama's campaign, who organized it, how it was run, where the money came from. Have you seen it?
July 5, 2008 12:08 PM | Reply | Permalink