AP Reporters Use Misleading Stats to Throw Cold Water on New Tax Law

On Sunday morning, Thomas Beaumont and Nicholas Riccardi at the Associated Press did all they could to convince readers that the tax bill just passed by Congress and signed by Donald Trump isn't seen as a big deal and has no genuine enthusiastic support (even though they found some) among those who voted for him in 2016.

They predictably claimed that the law bestows "its richest benefits on companies and wealthy individuals,' and employed a classic statistical deception to support that false contention.

Here are the opening paragraphs of the pair's downbeat report, with the final excerpted paragraph presenting the misleading statistics (bolds are mine throughout this post):

Trump supporters greet tax law with shrugs and measured hope

Ask someone like Sam Banks about the tax plan President Donald Trump signed into law Friday, and you hear something other than the effusive joy Republicans in Congress put on display this week.

The $1.5 trillion plan cuts taxes broadly while bestowing its richest benefits on companies and wealthy individuals. It is the first major legislative achievement for a president who rode to the White House with the full-throated backing of people like Banks who felt America’s economic policies needed a drastic overhaul.

Yet Banks, a 50-year-old farmer in sparsely populated southwestern Iowa, regards the tax plan with a blend of indifference and uncertainty tinged with hope.

“They had to do something, though it took them long enough,” Banks said of the president and the Congress his party fully controls. “It’s going to help the companies. It’s got to help me a little, I suppose.”

In pockets of the country where Trump scored big with voters last year, the response to the tax overhaul is mainly a muted one. You’ll get a few blank stares, some confusion and a bit of hedged optimism. What you won’t hear is excitement.

Nearly all taxpayers will receive an initial tax cut. But an analysis by the Tax Policy Center shows that the gains favor the wealthy. For households earning between $48,600 and $86,100, the average tax cut in 2018 will be $930. But the top 1 percent of earners — with incomes above $732,800— will enjoy an average tax cut next year exceeding $50,000.

The statistical sleight-of-hand in the final excerpted paragraph will cause many readers not paying close attention to believe that "the top 1 percent of earners" — who, for the record, may or may not be "wealthy," depending on how they manage their income — are indeed getting a "favor." After all, it appears at first glance that they're getting a tax cut of almost 7 percent ($50,000 divided by $732,800), while households in the middle-class range just cited will be getting only 1.4 percent ($930 divided by a rough average of $67,000). Alternatively, it looks like taxpayers making about 11 times as much ($732,800 divided by $67,000) will see savings that are over 50 times greater ($50,000 divided by $930). The AP just can't wait for its readers to scream, "It's not fair!"

That armchair "analysis" is bogus, because the average income of that top 1 percent is far greater than the $732,800.

So what's the real impact? It's certainly not what Beaumont and Riccardi are implying.

We can show how deceptive they are being by referring to a graphic found at CNBC.

When I visited it, the page defaulted to presenting the situation for all taxpayers in Minnesota in 2019. Readers can click on the graphics for other states to see that the percentage of people in each income bracket seeing decreases are usually similar to that seen for the Gopher State (the green sections in the bar chart represent tax reductions, orange represent no change, and red represents the percentage getting a tax increase):

Minnesota2019TaxLawImpactCNBC1217

(Note that CNBC couldn't resist using inaccurate class-warfare labeling, using "Richest 1%" instead of "Top 1%," and "Poorest 20%" instead of "First 20%" or "Lowest 20%.")

Readers visiting the CNBC web page can mouse over each of the percentage bars to see the following true percentage impacts at each level of income. That information enabled me to impute the average income in each income range for Minnesota:

Minnesota2019TaxLawImpacts1217

Except for the "next 4%" and the "Lowest 20%" levels, the percentage impacts in Minnesota are virtually identical. The lower percentage for the "Lowest 20%" is surely related to the fact that this group paid very little income tax under the previous law. The higher percentage for the "Next 4%" group appears to be present in many other states, and is likely due to the fact that this group was arguably unfairly hit hardest by the tax increases enacted in 2013 during the Obama administration, particularly its phase-outs of itemized deductions and personal exemptions.

Getting back to the AP dispatch, we can see that their comparison of the $50,000 average savings to $732,800 in income for highest-earning 1 percent is deceptive. Minnesota's average income for the top 1 percent of $2,668,750 is over four times as high as that group's lower limit of $640,480. This implies that the nationwide average figure for the top 1 percent is about $3 million, and that the $50,000 in average savings the pair cited is 1.6 percent of the top 1 percent's average income.

Readers should also note that the "Middle 20%" has a somewhat lower average ($61,429) than that range's midpoint of about $63,150. Presenting the savings for a range without identifying the midpoint, as the AP reporters did with a similar middle-income range, serves to make that group's savings look a bit smaller as a percentage of their income than it really is.

If the AP reporters had done a genuine average income-based comparison, it would have much more difficult to stoke resentment and class envy, which seems to have been their objective.

Beaumont and Riccardi took several other liberties with the truth that we've come to expect from establishment press reporters. Here are just three of them.

First, they failed to tag "the $1.5 trillion plan" as increasing projected deficits over ten years. Many readers will believe that $1.5 trillion is a single-year impact.

They also failed to recognize that the corporate rate reductions will effectively pass through to individuals and families in a number of ways, some of which will include product and service price reductions, higher wages to employees, and heavier corporate investment by U.S.-based and foreign-based companies. In fact, they dubiously claimed that "Most mainstream economists, though, have expressed skepticism that workers will benefit much from lower corporate taxes." That's right up there with the Scrooges on the left who claim that the bonuses we've already seen given to all employees at several companies because of the law's passage are just PR stunts.

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Finally, they contradicted their early claim that "What you won’t hear is excitement" by talking to someone who was genuinely excited. Specifically, Chip Martel of Beaumont, Texas told the AP that “I believe we’re in the process of making America great. We’re changing a lot of the policies that were done with Obama."

Cross-posted at BizzyBlog.com.


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Economy Personal Finance Taxes Conservatives & Republicans Associated Press CNBC Thomas Beaumont Nicholas Riccardi Donald Trump