Calling a Tail a Leg
By David Henderson
How many legs does a dog have if you call a tail a leg? Four. Saying that a tail is a leg doesn’t make it a leg.
There is no determining who is definitively right in the debate. Income is complicated. Taxes are complicated. Accounting is complicated. But Saez and Zucman have shown how focusing only on federal taxes, and not state and local taxes, has skewed our understanding of the tax code. They have also powerfully demonstrated that the very richest play by very different tax rules than the merely well-off and the working poor.
So writes Annie Lowrey in the misleadingly titled “The Rich are Different from You and Me: They Pay Less in Taxes,” The Atlantic, January 23, 2020.
The title is misleading because even if she makes her case that the rich pay a lower percent of their income in taxes than the rest of us (she doesn’t), there’s no disputing that they pay more in taxes.
But, contrary to Lowrey’s claim, there is a way to say who is right in the debate about various income groups’ taxes as a percent of their income: estimate their taxes and estimate their income and divide one by the other.
So how does Lowrey say there’s no right way? By taking seriously two Emmanual Saez and Gabriel Zucman claims: (1) that one should not treat the child tax credit and the earned income tax credit as a reduction in taxes. and (2) that one should regard employers’ contributions to their employees health benefits as a tax.
Neither claim is correct.
Sure, you can call an employer’s contribution to the employee’s health insurance a tax. But calling it as tax doesn’t make it a tax.