NYT Twists Data: Makes Great Personal Income News Appear Awful
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By Tom Blumer | August 21, 2007 - 10:05 ET
Try to imagine what the New York Times did with the following data:
Go ahead. Then go to the full post to find out.
Here it is (link requires free registration; the Times' figure of $55,714 differs from the table above because of rounding):
The New York Times has to work very hard to make the performance of the economy during the past few years look bad. This morning, David Cay Johnston did his part.
Bear with the technical stuff for a bit; the meat will arrive shortly.
Every year, the IRS publishes information about the tax returns it received in the second preceding year.
2005's tax-return data was released yesterday (data referred to here is not linked because it is in PDFs and Excel files; anyone who wants to see the underlying data can e-mail me). Among the stats the IRS produces is one with the confusing name of "Adjusted Gross Income Less Deficit." I will call it "Revised AGI" for this post. "Revised AGI" adds a long list of items back to taxpayers' reported Adjusted Gross Income (the number at the bottom of Page 1 of the long-form 1040) in an attempt to approximate taxpayers' total income, whether it is taxed or not.
There are problems with the data I will note shortly.
As to Johnston's article, he and the Times chose the specious "2000-2005" reportorial spin noted above, even though:
* The more important news by far is that the real increase in Revised AGI in both 2004 and 2005 is greater than during either of the final two good years of the Clinton economy;
* The real decreases in 2001 and 2002 occurred largely because of the bursting of the Clinton-Era dot-com bubble and the September 11 terrorist attacks. The dot-com bubble got mentioned by the Times in the context of quotes from White House sources (the better to make it look like excuse-making); Johnston and the Times made the September 11 attacks invisible.
An obvious omission: The IRS does not include the Earned Income Credit (EITC) in its compilation of Revised AGI, even though the EITC represents real money that either reduces other taxes or goes directly into beneficiaries' pockets. Total EITCs claimed increased from $19.5 billion in 2000 to $42.4 billion in 2005, largely because of the credit's expansion in the Bush tax legislation of 2001 and 2003. Spread over the annual average of roughly 132 million tax returns filed during that period, the $22.9 billion increase in the EITC ($42.4 bil minus $19.5 bil) amounts to over $170 per return.
Don't forget the tax-rate cuts: Now add the benefit of the Bush rate cut in the lowest bracket, which has benefited all but the very top few percent of taxpayers. Since its inception in 2001, that rate cut from 15% to 10% -- never mind the reduction in higher brackets -- has reduced taxes for most single filers by at least $350 per year, and for most joint filers by at least $700.
The EITC expansion, the cut in the lowest rate just noted, and the reductions in the rates applied in higher income brackets, when combined, surely more than make up for the $477 difference ($55,715 minus $55,238) between 2000's and 2005's Revised AGI amounts. So while average pre-tax income may have fallen, average after-tax income has risen -- even during the Times' artificially induced period of analysis.
Johnston's obviously agenda-driven bottom line is this:
"The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy."
The growth in real incomes in the two years noted, the continuation of that growth in 2006, and the positive impact of the Bush tax cuts all make Johston's contention about the sources of whatever economic stress may exist absurd.
A more accurate revision to Johnston's claim would be this: "The fact that Old Media won't report the success of the economy since the Bush tax cuts took hold helps explain why so many Americans report feeling economic stress despite overall growth in the economy."
Cross-posted at BizzyBlog.com.
—Tom Blumer is a CPA based in Mason, Ohio and a contributing editor to NewsBusters
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