Friday, October 18, 2019

How Elizabeth Warren's Tax Advisers Lie With Statistics

Laurence Kotlikoff explains in The Wall Street Journal that Elizabeth Warren's advisers are lying with statistics when they claim the lower pay a larger percentage of their income in taxes than the rich.

Here is one of the methods (via Kotlikoff):

Economists Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley are advising Elizabeth Warren’s presidential campaign and drawing generous media attention for their assertion that the U.S. tax system is flat—that the middle class and poor pay as great a share of their income in taxes as the rich. They’re wrong, and three huge mistakes underlie their analysis.
The biggest mistake is to focus on gross, not net, taxes. They ignore transfer payments, like Social Security, which are disproportionately paid to the poor. In doing so, they mistake language for economics.
To see the problem, consider a simple thought experiment. Joe, a minimum-wage employee, earns $15,000 a year. The government taxes Joe $1,000 and transfers him $600, so that he pays $400 on net. In another scenario, Joe pays $10,000 in taxes and collects $9,600 in transfer payments. Again, he pays $400 on net. But in the first scenario, Messrs. Saez and Zuchman would report Joe’s gross tax rate as a reasonable 6.7% ($1,000 over $15,000). In the second, they’d call it an onerous 66.7%.
I hasten to add that taxes on anyone are a bad idea but taxes on the rich tend to shrink the capital base which is the engine that produces the many goods and services we use in our daily life.

Thus, a tax on the rich results in the shrinking of the standard of living for all of us.



  1. But keep in mind there three basic ways to make a living and to get rich, stay rich, and get richer:
    1) Please your fellow man.
    2) Through Government.
    3) Theft.

    (one may argue 2 & 3 are the same thing)

    While the poor pay little to nothing in net taxes in the USA people in the middle class can easily exceed the tax rate of the ruling and crony classes that fall into #2.

    Taxing those who do 1) reduces capital stock and makes everyone poorer. Taxing those who take the route of 2) only means they will find a way to get even more out through government.

    What Warren and the others are trying to do is to eliminate route 1 from everyone and make routes 2 and 3 the only choices. 2) people like warren can control or at least divert wealth for themselves and 3) government can punish as it sees fit. Government wants control and the people running it want unearned wealth for themselves. They are scamming the poor and middle class into making themselves poorer and more dependent.

  2. Warren wants to have advisers that lie like she does. The lies from Saez and Zucman are similarly unsophisticated as Warren’s lies. They are blatant and take only a little digging to uncover.

    Everyone knows about Warren’s Native American fiasco. Now it has come out that she lied about being sexually assault to get in on the #metoo movement. Her claims of losing a teaching job due to being pregnant have been shown to be a lie. She even openly lied in a Facebook ad.

    All politicians lie. Warren has been lying for decades, specifically about being a victim. Victimhood has become an asset in the crazy intersectionality world. Warren and her tax advisers want to show the poor to be victims of the rich. What better way to do so but to lie in the fashion of Warren.