April 15, 2005

Tax Freedom Day?

April 15 sometimes brings out the worst in people. For a long time, the Tax Foundation has been annually publicizing "Tax Freedom Day," billed as the day of the year when Americans have earned enough to pay all their taxes. (This year it's April 17, they say.) Citizens for Tax Justice debunked the Tax Freedom Day concept quite effectively almost a decade ago, and the Center on Budget and Policy Priorities now responds to the Tax Foundation report annually, with a good summary explaining why the "Tax Freedom Day" concept is silly and inaccurate when it's used as an estimate of middle-class tax burdens. Of course, this doesn't stop the Tax Foundation from publishing the same misleading statistics every year-- and certainly doesn't stop more gullible members of the media from reporting these statistics verbatim.

So here's a quick roll call of newspapers that did especially well and especially poorly in reporting this issue.

1) Newsday reported this data with no caveats whatsoever. Their coverage is here and here.
2) The Chattanooga Times Free Press regurgitates the Tax Foundation line with no critical analysis in an editorial. The editors note simperingly that "thanks to federal income tax cuts championed by President George W. Bush, [Tax Freedom Day] is still coming 16 days earlier than it came late in the administration of President Bill Clinton," and cite the Tax Foundation data as proof that "It is especially clear that taxes are still too high." The Free Press doesn't make their content available to non-subscribers, so you can't read it-- but it's no great loss.
3) In what appears (on their on-line edition) to be an editorial, the Macon Telegraph cites the Tax Foundation data approvingly, decrying the "unfair share" we all pay to Uncle Sam. The Telegraph absolves itself a little tiny bit by noting that "the machinations, computations, calculations and guesswork that get us to that final tax bite number is more troubling than writing the check itself," but then throws it all away by citing tax complexity as a reason to enact a flat tax. I'd rank them #1 except that I want to reserve that distinction for a newspaper someone has heard of.
4) A brief yet irresponsible editorial in the Belleville News-Democrat gives the basic TF spiel, then reminds us that "it will be worse if Congress refuses to make Bush's tax cuts permanent."
5) The Deseret Morning News takes two swings at this one. A member of the paper's editorial board page cites the TF data approvingly-- then calls it "boring statistics" and asserts that "It's enough to know that you spend about a third of your time working to pay your government." Another article gives the TF data such fawning attention that it would probably rank #1 for ineptness all by itself. Here's the critical evaluation: "The Tax Foundation study was based on an analysis of incomes related to Net National Product. Other groups use different statistical approaches, including personal income and gross domestic product. The differences in the results are usually around 1 percent, which is "fairly trivial," Hodge said." What the crack research staff at the Morning News has done here is to read the section of the TF's own report where they give their own (very misleading) version of what critical people have said, and then just regurgigate the TF language. First prize!
6) The Atlanta Journal Constitution presents the Tax Foundation data USA-Style, with virtually no analysis of any kind, here.
7) South Carolina's "The State" newspaper gets bonus points for not making a big rhetorical deal about it, but is firmly on the list for not reflecting even momentarily about whether the Tax Foundation data makes sense.

1) The Boston Herald reports the Tax Foundation data without soliciting input from the many researchers who think it's a misleading measure. But the Herald article wins points for noting that Massachusetts has an especially late Tax Freedom Day not because its taxes are so high (they're not) but because Massachusetts is a relatively wealthy state. Cleverly, the Herald also points out that when the mounting federal deficits are included, Tax Freedom Day is much later. (Take that, Chattanooga Free Press.)
2) The Buffalo News actually cites the CBPP critique of the TF data in their nicely skeptical piece. They don't get to the critical point raised by CBPP, which is that the use of national and statewide averages grossly overstates the impact of taxes on the typical taxpayer, but never mind.
3) Alan Essig and Sarah Beth Coffey of the Georgia Budget and Policy Institute point out that the Tax Foundation's flawed data can be used in a way that makes the relatively low cost of adequately funding state services sound pretty good. (quick free registration required).

Honorable mention to all those newspaper editors who smelled a rat and chose not to write about the Tax Foundation's bogus study at all.


At 12:31 AM, Anonymous Reader said...

All things considered, the criticisms of CBPP and others of Tax Freedom Day are pretty lightweight. If you dig into the report, you find the data for Tax Freedom Day are taken directly from the Bureau of Economic Analysis. Also, the study isn't meant to measure the tax burden of taxpayers in the middle income group (although some reporters mistakenly report it that way). It's meant to measure the slice of the total economic pie consumed by taxes each year.

That's useful to know for some purposes, isn't it? I mean the OECD publishes tax revenue as a percentage of GDP every year also (http://www.oecd.org/document/21/0,2340,en_2649_201185_33808789_1_1_1_1,00.html). To an economist, that helps gives a sense of the magnitude of size of the state, which is what tax freedom day is meant to do. If journalists get the story wrong, that's an indictment of their economic education, not the concept of tax freedom day.

Also, see the resposes to CBPP's criticisms in the FAQ here: http://www.taxfoundation.org/taxfreedomday.html

At 1:14 AM, Blogger Matt G said...

The comment from "reader" seems wrong to me. If the goal of the Tax Foundation in publishing this statistic is to "measure the slice of the total economic pie consumed by taxes each year," then why would they insist on using the term "average" in describing their data? If you know that this is a situation where averages are simply misleading-- and that's the main (and unrefuted) point of the CBPP response-- then stop using the word "average" to describe the results! TF's failure to do this tells me they're out to mislead. And I bet they're not writing angry letters to the papers that abuse their data....

At 3:53 AM, Anonymous Reader said...

Matt --

Are you sure it's fair to say Tax Foundation is "out to mislead"? Seems to me honest debate should center on ideas not motives, because once you're reduced to questioning people's motives it usually means you've got the weaker end of the argument. In any case, the tax freedom day report and website have an entire section on methodology that discusses all these issues which is available for anyone to read.

Regarding the use of the word "average," if you actually look up the word's definition at m-w.com you'll see the first definition is "equaling an arithmetic mean." That is exactly the sense in which the Tax Foundation uses the word average. What's misleading about that?

For example, they use it as "the nation's average tax burden" -- not "the average American taxpayer's burden" which the strawman that the CBPP attacks each year. I'm not sure what the tax freedom day report said in previous years, but you can read the site for yourself -- they only use the word "average" once in main text of their press release (not counting FAQ) and it seems pretty fair to me: http://www.taxfoundation.org/taxfreedomday.html.

Besides, if they were deliberately trying to mislead why would they post this right up front in their release?:

"Does Tax Freedom Day measure the "average" American tax burden?
Yes. The mathematical average of any group is found by adding up all the values and dividing by the number of values. Tax Freedom Day totals up tax collections and divides by national income. The result is the average tax burden for the U.S. economy as a whole. Including high-income taxpayers tends to increase the average tax burden — just as including low-income taxpayers decreases it. To be an objective mathematical average, Tax Freedom Day must include all taxpayers."

Maybe that explains why few reporters are pursuaded by CBPP's and others criticisms.


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