By David Henderson
“Nobody likes to pay taxes. Nobody wants to raise taxes on anybody.”
This is a quote from a newly elected Democratic congressman from Illinois named William L. Enyart. So, unless he considers himself a nobody, would he advocate raises on some people? No, right? Because nobody wants to raise taxes on anybody. That’s what Mr. Enyart said. And I bet he doesn’t think he’s a nobody.
Except that he does want to raise taxes on many bodies. Elsewhere in the New York Times story, Binyamin Applebaum and Robert Geleloff write: “The focus, he [Enyart] said, should be on requiring the rich to pay more.” There is one other interpretation that is consistent with Enyart’s remark: Maybe he regards “the rich” as nobodies.
All of this reminds me of one of my favorite short economics jokes. In his excellent Price Theory: An Intermediate Text, David Friedman calls it Economics Joke #1:
Two economists walked past a Porsche showroom. One of them pointed at a shiny car in the window and said, “I want that.” “Obviously not,” the other replied.
It also reminds me of a homemade sign that economist Ben Powell had on his door when he was on the faculty at San Jose State University and a number of faculty were threatening to go on strike. They had professionally made signs that said, “I don’t want to strike, but I will.” Ben’s sign: “I don’t want to strike, so I won’t.”
One other thing to note about the NY Times article, something that economist Greg Mankiw caught. Applebaum and Geleloff do a lot of comparisons of percent of income paid in taxes in 2010 versus 1980. Why is the year 1980 significant? Because high inflation in the 1970s had put many people, including even lower-middle-income people, in tax brackets that had previously been reserved for higher-income people. I remember, as a middle-income person in 1978 making about $23,000 a year and having no deductions other than the standard deduction, paying a marginal federal income tax rate of 32 percent.
So what the reporters are really showing is that people paid less tax as a percent of income in 2010 than they paid in a year in which, for most people, taxes as a percent of income were at all-time high. Surprise!
The more-relevant comparison, which the article doesn’t make (I can’t look at their graphic without paying, but maybe it’s there), is between 1985, when the Reagan income tax rates had fully kicked in and indexing of tax brackets had begun, and 2010. That would be much more informative.