Arizona Supremes Show Some Numeracy
By David Henderson
In every course I taught in the last 20 years before I retired, I did about a 45-minute segment on numeracy. One point I emphasized is that there is typically a huge difference between a percent change and a percentage-point change. So, for example, when various proponents were advocating a one-percentage-point increase in our local sales tax, they would sometimes claim that it was a one-percent increase. A one-percent increase sounds trivial and, indeed, is trivial. But a one-percentage-point increase, which is what they were actually advocating, on top of an 8-percent sales tax, is a 12.5 percent increase. And that’s not trivial.
Which brings me to the Arizona Supreme Court. In a decision on Wednesday, the court disqualified an initiative from the Arizona ballot for the November elections. Here’s how Ricardo Cano of the Arizona Republic accurately describes the measure:
Prop. 207 would have raised income-tax rates by 3.46 percentage points to 8 percent on individuals who earn more than $250,000 or households that earn more than $500,000. It also would have raised individual rates by 4.46 percentage points to 9 percent for individuals who earn more than $500,000 and households that earn more than $1 million.
And here’s how he describes the complaint of the measure’s opponents:
The complaint alleged the petitions were misleading because they referred to the proposed tax-rate increase as a “percent” increase and not the more accurate “percentage point” increase. According to the complaint, the tax rate would have seen a 76 and 98 percent increase and not a 3.46 and 4.46 percent increase.
It really would have been a 76 and 98-percent increase, respectively. That’s huge.
Ed Kilgore of New York Magazine writes:
Considering the rare, massive attention the initiative was already receiving and would continue to receive until Election Day, the odds of a significant number of voters misunderstanding it was limited, to say the least.
I would bet, not that there’s any easy way to formulate a bet, that Kilgore is wrong. In my experience teaching MBA students who are military officers, I found that many hadn’t even thought about the percent/percentage-point distinction until I raised it. Also, Kilgore is leaving out the incredible ignorance voters have about the issues they’re voting on. I’m sure that he gave the initiative “massive attention.” I wouldn’t be surprised if at least 30 percent of the voters in November, enough to swing the vote, would have given the issue zero attention.
By the way, although Mr. Cano does a good job of presenting the issues, he makes his own numeracy mistake in another paragraph of his news story, writing:
The Arizona Chamber of Commerce, [Governor] Ducey and other state business leaders have largely ignored a proposal by former PetSmart CEO Phil Francis and several others to raise the sales tax by a cent to bring in more money for education.
A one-cent higher sales tax on a $20,000 car would, assuming a completely elastic supply of cars, raise the price of the car by one cent. That’s trivial. Francis et al are not advocating a one-cent increase in the sales tax. They’re pushing for a one-percentage-point increase in the sales tax rate. That’s substantial.
Here’s the Arizona Supreme Court’s decision.
Disclosure: One member of the Arizona Supreme Court, Clint Bolick, is a Facebook friend and, indeed, an actual friend. Given the numeracy I’ve observed in conversations with him, I would be surprised if he wasn’t one of the Justices who voted to knock the measure off the ballot.