Jul
27
2009

Mitch Albom's Faulty Tax Math

Detroit Free Press columnist Mitch Albom–best known for his bestseller Tuesdays With Morrie–had a July 25 column that criticized the Obama healthcare reform with an argument that suggested an unfamiliarity with how the U.S. tax system works:

In explaining why it was OK to sock a new 5.4 percent tax on the highest earners in this country–to pay for healthcare reform–President Obamaâ┚¬Ã¢”ž¢s press secretary, Robert Gibbs, said this:

"The president believes that the richest 1 percent of this country has had a pretty good run of it for many, many, many years."

Ah. So thatâ┚¬Ã¢”ž¢s it. The old "Youâ┚¬Ã¢”ž¢ve had it good enough for long enough" policy. Thatâ┚¬Ã¢”ž¢s why a family earning a million dollars a year should now cough up $54,000 of that–in addition to all the other taxes it pays–to cover healthcare for people who may not pay a penny of new tax themselves.

But a family making $1 million a year wouldn't pay an extra $54,000 in taxes from the proposed 5.4 percent surcharge–because that surcharge would only apply to income beyond the first million dollars of income. A smaller surcharge would kick in at $350,000, and increase at $500,000–but the total tax increase for a couple making $1 million would be $9,000, or one-sixth of what Albom claimed was a "grossly overweighted tax."

This is how taxes generally work, with marginal tax rates that apply to income over a certain level. You'd think that Albom, who has an MBA from Columbia University, would be familiar with the concept. But media outlets have been known to trip up on this subject, even when their stories are prepared in conjunction with tax experts (FAIR Action Alert, 9/22/08).

Albom's charge that the Obama administration is "engag[ing] in the worst and most destructive form of politics: class warfare" is also a familiar corporate media trope (Extra!, 1-2/01). Given that for the media, "class warfare" is almost always waged by the bottom against the top, it's perhaps not surprising that Albom has trouble figuring out what Gibbs means when he says that " the richest 1 percent of this country has had a pretty good run of it for many, many, many years." (Albom speculates that he's "suggest[ing] that the top 1 percent are a bunch of Bernie Madoffs, that theyâ┚¬Ã¢”ž¢ve been scheming their way to riches, evading the system, hiding their money in complicated offshore deals.")

Gibbs is presumably referring to data compiled by the Congressional Budget Office (CBPP, 4/17/09) showing that income for the top 1 percent has climbed by 256 percent from 1979 to 2006, while the take-home for middle-income households has grown by only 21 percent; for poor households, growth was just 11 percent. The share of all after-tax income that's gone to the top 1 percent has more than doubled since 1979, from 7.5 percent to 16.3 percent. You might say they've had "a pretty good run."

About Jim Naureckas

Extra! Magazine Editor Since 1990, Jim Naureckas has been the editor of Extra!, FAIR's monthly journal of media criticism. He is the co-author of The Way Things Aren't: Rush Limbaugh's Reign of Error, and co-editor of The FAIR Reader: An Extra! Review of Press and Politics in the '90s. He is also the co-manager of FAIR's website. He has worked as an investigative reporter for the newspaper In These Times, where he covered the Iran-Contra scandal, and was managing editor of the Washington Report on the Hemisphere, a newsletter on Latin America. Jim was born in Libertyville, Illinois, in 1964, and graduated from Stanford University in 1985 with a bachelor's degree in political science. Since 1997 he has been married to Janine Jackson, FAIR's program director. You can follow Jim on Twitter at @JNaureckas.