Figures don't lie | Eastern North Carolina Now

    Publisher's Note: Jim Bispo's weekly column appears in the Beaufort Observer.

    We hear that figures don't lie - but liars figure. So be careful. In places like MN and IA it would seem that the so called "figuring" is really simply counting (or is it mis-counting??). Of course counting is a problem for some folks. Generally speaking more so for the "losers" than the "winners".

    We need to be aware of the enumerators and watch them closely. But what we need to be even more careful of is those people who have graduated from "counting" to using percentages to "prove" their points. That's exactly what Warren Buffett did (and the anointed one accepted at face value - surely for it's political value, not because he doesn't know any better... maybe). When Mr. Buffett spoke of his secretary paying a higher tax rate than he did, he likely spoke the truth, but in doing so, he certainly created the impression that she paid more in tax than he did which was disingenuous at best and totally dishonest a worst.. If Mr. Buffett pays his secretary more than $34,500 (and less than $83,600 and she files as "single") her marginal tax rate is 25% - which is clearly more than the 15% capital gains rate that Mr. Buffett very likely pays. If he pays her over $83,600 (and less than $174,400), her marginal tax rate is 28% which is an even greater disparity. As her pay goes up the marginal rate she pays increases.

    Unfortunately, paying a higher "tax rate"(i.e. marginal tax rate) in the Buffett context has been interpreted by many folks to mean "paying more taxes" - which is absolutely not true. Even though I heard the Prez tell us that Mr. Buffett's secretary pays more in taxes than he does, it is not true. In his case, I suspect that he knows the difference but is willing to mislead us (as he so often seems to be willing to do) to support his position. The folks who make that argument have been misleading us for a long time - and largely getting away with it. When they talk about the tax rates that folks pay, and it serves their purpose (as in the anointed one's use of the Warren Buffett example), they most often are talking about marginal tax rates - even though they virtually never say that. (For the record, the marginal tax rate that you pay is the percentage rate that you pay on the last dollar you earned.) Take a look at an example: Your filing status is "single". You have an adjusted gross income (AGI) of $44,006 and taxable income of $34,500. Your marginal tax rate is 15% and your tax is $4,750. Now suppose your AGI and taxable income increases by $4.00 to $44,010 and $34,504 respectively. Your marginal tax rate is now 25% and your tax is $4,751. In the first case your effective tax rate is 10.734% and in the second case it is 10.795%. The $4 increase has moved you from one marginal rate to the next, but you only pay the higher percentage on that last $4. So much for paying taxes at the 28% rate. And, of course the folks who try to mislead us with the foregoing misdirection, never seem to ever try to make a distinction between so called "earned income" and so called "unearned income" (which are taxed at vastly different rates). That makes their argument even more specious.

    Most tax preparation software will calculate your "effective tax rate" which is entirely different than the "marginal tax rate". The "effective tax rate is the dollar amount of taxes you paid divided by your adjusted gross income - expressed as a percentage. In Mr. Buffett's case, if virtually all of his income is capital gains, his effective tax rate is likely close to the capital gains rate he pays (i.e. 15%). When you consider that the average effective tax rate paid by US taxpayers is in the neighborhood of 9.3%, it is a safe bet that the effective tax rate paid by his secretary is considerably lower than the 15% he likely pays and well below the highest marginal rate that she pays. The terms "misleading and outright dishonest" come to mind when you think about the Buffett (and Obama) rhetoric concerning taxes paid by Mr. Buffett's "secretary".

    The anointed one follows up his "Buffett Rule"rhetoric with, "Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same," He also says. "It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.". (This from an individual who lives in government housing at no cost, with a lot of servants, partaking of free air and ground transportation and a lot of other "freebies" all the while telling us that everyone should be paying their "fair share" of taxes. What constitutes a "fair share" remains un-defined.)

    How could anyone possibly not like the latest words the Prez is reading off his Teleprompters?? What is unfortunate is that the words and music don't seem to go together. What is even more unfortunate is that a whole lot of folks don't bother to focus on that fact at all. They just listen to what the anointed one says (i.e. reads off his Teleprompters), and accept it at face value without ever paying any attention to what he actually does (which very seldom ever jibes with the rhetoric).

    A government and financial system that plays by the rules?? Whose rules?? Perhaps the crony capitalism rules that seem to be de rigueur among this group?? Always fair and even handed with respect to the bundlers, and big campaign contributors. Apparently it's too bad about all the rest of us.

    We hear the Prez telling us that we need to punish those who would take jobs out of the country. Apparently he overlooked his pal Jeff Immelt of GE fame whose company has not only paid zero taxes but in the process has moved a load or folks out of the USA. Or perhaps, all that fairness and punishment is only meant for folks who don't contribute (or "bundle") enough. Hmmm...

    And what do you suppose is a "fair share" for the 46% of folks who currently pay no income tax - or even enjoy a negative income tax (i.e. they get a tax refund even though they have paid nothing in to the income tax coffers at the IRS)?? There are a lot of long suffering taxpayers who believe that a whole lot of those folks should be paying some income tax - just so they would have some "skin" in the game. Surely that would help get (and, hopefully keep) them interested in how the money is being spent, to the benefit of us all.

    We could stand a whole lot less misleading rhetoric from the anointed one and his surrogates. Unfortunately, it is not clear that "honesty" is even in their lexicon. We also do not need anyone fomenting class warfare as our Prez seems to be wont to do.

    D'ya think??