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Wednesday, March 28, 2007

McIlheran Watch: Mike Mathias Owes Me $20

The male half of Pundit Nation offers,
I’ve got a crisp $20 bill and a beverage of choice for anyone—liberal, conservative, or Althouse—who can tell me what the hell Patrick McIlheran is talking about in this post.
The "this post" that Michael is referring to is another in Patrick McIlheran's "Pity the Poor Rich People" series. We last had a visit from that series last December, when McIlheran complained that the amount of taxes collected from those rich people keeps going up. He neglected to tell you that the amount of money earned by those rich people keeps going up at about the same rate.

We have a similar bit of misdirection here as well. This is the current complaint:
Our government is massively redistributing income already, to the tune of more than a trillion dollars a year, despite the nonsense you hear about how the rich are making out like bandits.
Yeah, those lucky duckies who are so poor they don't even earn enough to pay taxes on, they're just raking in that taxpayer dough! Wish I were one of them!

To explain all of this to Mike, I'll use some pretty pictures. The chart below breaks the United States population down into fifths, or quintiles in statistician-speak.The light blue represents the 20% of US households earning more than $88,000 a year; the red represents the 20% of US households earning between $55,300 and $88,000 a year; the yellow represents the 20% of US households earning between $34,750 and $55,300 a year; the green represents the 20% of US households earning between $18,500 and $34,750; and the dark blue represents the 20% of US households earning less than $18,500 a year. Easy enough, right? Well, this next graph explains what's got McIlheran so upset:This represents the percentage of total federal taxes paid by those same quintiles. In other words, even though the light blue and dark blue sections of the above pie contain the same number of households, the light blue people pay way more of the taxes (57% vs. 2%). Hardly seems fair, does it? And even worse--and this is the lucky part for all those people barely scraping by with poverty wages--is this chart:This represents how much of the federal spending benefits each of those same quintiles. Yes, it's true boys and girls, even though the light blue and dark blue areas have the same number of households, the dark blue people get more of those benefits (26% vs. 19.5%). But let me throw in one more chart:This pie represents all of the income earned in the United States--and, because I couldn't google up the data I really wanted, I'm settling here for after-tax income. And, yes, you are reading that right: Even though the light blue and the dark blue have the exact same number of households, the light blue people are actually earning 49% of all the after-tax income in the United States compared to just 5% for the dark blue quintile.

Let me rephrase this all, since it's important to understand why McIlheran is once again full of economic crap: Despite what McIlheran sees as some "massive" income redistribution scheme, the wealthiest 20% of people are earning--after those redistributionist taxes--half of all the income earned in this country. The richest 20% of people, in addition to earning half the money, are still getting about 20% of the benefits paid out by the feds, so they get a disproportionate share of the income and a fully proportionate share of the federal spending. This, somehow, is the equivalent of highway robbery for Patrick McIlheran. It is not.

Look, I'm not advocating any specific taxing or spending policies--for that matter, neither is McIlheran--but I do find it important to consider all of the data before making that next step. If you only listen to McIlheran's whining about how hard those poor, poor rich people have it, you won't get anything like the full story.

My source for the first chart was the Census Bureau, via Wikipedia, where you should check the "Household Income Over Time" section as a verification that the rich are, indeed, getting richer: The top quintile has doubled their income since 1967 while the bottom has increased only $3000.

My source for the second and third chart was the study (.pdf) McIlheran cited.

My source for the last chart was this study (.pdf) from Stanford.

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