Author Archives: Michael Ohanian

About Michael Ohanian

Michael Ohanian is a 30 y/o economist who resides in Maryland. He graduated Magna cum Laude from the University of Maryland Baltimore County with a B.S. in Financial Economics and currently works as a market economist for a private company. He is the owner and chief contributor of the conservative blog The Elephant in the Room: www.loudmouthelephant.com. On Facebook, he runs the blog's page (www.Facebook.com/LMElephantblog) as well. Mike is a permanent panel member for two conservative internet radio shows, OpinioNation and The 405 Live at 10:00pm EST on Wednesday nights and 10:00am EST on Saturday mornings, respectively. To listen, visit http://www.the405radio.com/.

A “Quick and Dirty” Look at Obama’s Tax The Rich Plan

I couldn’t resist. I saw the following article and I just had to write about it: http://money.cnn.com/2012/11/14/news/economy/obama-taxes-deficit/index.html?hpt=hp_t3 

Yes, I know that in the post-2012 election era, my blog will naturally pivot to more philosophical writings, but some economic analyses will come up here and there. This is an example of one of these economic analyses.

As many readers of my blog know, rarely would I conduct an analysis on a simple article such as the one listed above. Usually, as seen in this previous analysis, I prefer digging deeper and analyzing primary-source data… usually involving IRS data tables, OMB information, or anything of the like. Since this is a simple analysis of the second-hand information discussed in an article, it is officially a “quick and dirty” look.

The CNN Money article talks about Obama’s hard-line plan on raising taxes on the wealthy. At the bottom, it goes on to list the various increases in revenue for each tax-raising move. Keep in mind, these revenue figures summed up over a period of 10 years. They are:

- Letting the Bush-Era Tax Cuts Expire for High-Income Earners: $1 trillion in revenue raised over the next decade

– Limiting Tax Breaks (and, I’ll assume deductions): $500 billion in revenue raised over the next decade

– Increase Carried Interest Tax Rates: $13.5 billion in revenue raised over the next decade

– Imposed the Millionaire Minimum Tax (the “Buffett Rule”): $47 billion in revenue raised over the next decade

– Enact Business Tax Proposals: Though not explicitly clear, this would raise $240 billion in revenue raised over the next decade

Now, using simple math, these five main tax increases raise $1.8 trillion in revenues over the next decade. If divided equally over 10 years, that’s $180 billion per year. To put this in contrast, the budget deficit for Obama’s 2013 budget is between $909 billion and $1.1 trillion, depending on whose estimate you’re looking at. For conservative numbers sake, we will use the $909 billion value, and we can see that by enacting ALL the tax hikes Obama wants, he would be shrinking the 2013 budget deficit by a very small amount. In 2013, should all these tax increases work like Obama has said they would, our government would still have a $729 billion deficit. Basically, as stated numerous times throughout this blog, increasing taxes on the wealthy does very little to close the deficit. While it does have a small benefit with respect to direct revenue increases, the negative effects of increased expenses on job creators and small business owners will hurt employees’ pockets, ultimately slowing down the economy further.

There is another part of this proposal Obama has promised: spending cuts. So far, I’ve only looked at the revenue side of this plan. It’s time to look at the spending cut side. Examining the CNN article, Obama claims he will cut $4 trillion from the federal budget over 10 years. This is obviously an average savings of $400 billion per year.

Let’s now take a look as to how this all plays out. The following figures are simple linearly-extrapolated numbers based on the conditions we know currently exist in the 2013 budget:

For 2013 – Government expenditures: $3.808 trillion / Government revenues: $2.902 trillion.

According to Obama’s $400 billion per year spending cut savings, let’s assume the government will then spend about $3.4 trillion per year over the next 10 years (granted this is difficult to predict since entitlements such as Social Security and Medicare are expected to rise in cost due to the aging population). Let’s also assume that the government, based on the $180 billion per year increase in tax revenue, will take in $3.083 trillion per year over the next 10 years. The budget situation would look something like this (all dollar figures are in trillions of dollars):


*Based on current budget estimates

Again, it must be stated that assuming expenditures and revenues stay the the same year after year is a tough sell, but, being that all this discussion centers on estimated spending cut savings and estimated revenue increases, it’s semi-safe to say that this chart displays a good approximation of average values. Notice that even with $400 billion per year in spending cut savings factored in with $180 billion per year in additional revenues, significant deficits remain, and more importantly, the total national debt still balloons to over $19 trillion in 10 years. Unfortunately, as the population ages, expenditures are going to rise, and as the economy declines further because of exogenous forces like slow economic growth worldwide and endogenous forces like business-stifling tax increases, revenues are going to shrink. This chart shows very optimistic scenarios, and realistically, it’s doubtful that if passed as Obama wants it, this spending cut and tax increase plan will produce deficits smaller in size than the ones shown here.

In short, though this is a “quick and dirty” look at Obama’s budget plan proposal, it leads me back to the original conclusion: increasing taxes will do little to help our budget, and spending decreases via entitlement reform are really the budgetary remedy this country needs. If nothing is done soon, as time goes on, our entitlement spending will swallow us further into the black hole of debt oblivion.

To view the original post and see its follow-up comments, visit The Elephant in the Room: http://loudmouthelephant.blogspot.com/2012/11/a-quick-and-dirty-look-at-obamas-tax.html

Where Do Republicans Go From Here?

From the conservative blog The Elephant in the Room – www.loudmouthelephant.com:

As all of you have undoubtedly realized, November 6th, 2012 was not a good day for the GOP. If elections and politics were a matter of winning and losing, we lost big time. In the presidential election and in most senate races, the republican party did not perform strongly.

Fortunately for republicans, and for the nation, elections and politics are not about winning and losing; they’re about ideas, proposals, and problem solving. While the pangs of Tuesday night will surely resound for weeks to come, this isn’t a time to sulk, bicker, and blame. Reassessing the past and licking our wounds will do us little good. It’s time to work together as a party, a coalition, and a cause to bring us together for not only the sake of our institution, but for the greater good of our country.

What is this about? Teamwork. It’s as simple as that. It has been observed and reported that the democrats and Team Obama have a great “ground game” and that’s what propelled the President to victory. I believe this is very accurate. There is something to learn from our losses, however. Since this isn’t a game to be won or lost… since this isn’t a battle by which we must hurt the other side in order for us to succeed, the best way to move forward is to work together, not only improving our “ground game,” but our message, plans, and platform overall.

So where does it start? Well, for starters, I think it’s all about education. In all honesty, the GOP has some truly great ideas based on some respectable and virtuous principles, but we haven’t done a great job at spreading the word. Let’s face it; we’ve lost 5 out of the last 6 elections with respect to the popular vote. I don’t believe it’s the result of having inferior ideas; I believe it’s the result, mainly, of being poorer at educating the public about our ideas. While no platform is perfect, and I’m sure some things will change for the GOP as a result of this election, we have not only been on the losing side of telling our story, but the democrats have been telling our story for us. Obviously, they’re not going to paint a rosy version of our side, as expected, and because of that, misinformation about what we believe has spread rapidly.

This message, however, is not about setting a plan for what message we want to spread; I’m sure those specifics will be ironed out over the next year. This message is about how we should spread it, calling everyone on our side to be, well…. Loudmouth Elephants. We all need to be teachers of our ideas, and we all need to be sharing these ideas often. We are a diverse group comprising various skills, and we should be utilizing these more effectively. Some of us write while others talk. Some have radio shows while some run websites. Regardless, if we do not work hard at expressing our views and sharing the exemplary ideals we cherish, we can expect many more November 6th-like nights to occur for years to come. Keep in mind, this isn’t about becoming militant. There is nothing beneficial to us or to our country to become isolationists or “exclusivists.” Many Americans, for example, claim to have conservative economic beliefs, but conversely, they are turned off by other aspects of our platform. Whether their perceptions of that platform are factual or not is irrelevant; it’s our job to project the truth about where we stand while rejecting the caricature that has been painted of our ideology and our party. Additionally, this is not about alienation. We can spread our message without cutting off moderates, liberals, or any views that may exist in the melting pot that is our mixed political environment. Most importantly, this isn’t about conversion or proselytization. We don’t have to “convert” people to push our cause; if our message is true, and our ideals are proper, Americans will choose freely to accept many of our views and positions.

How does this connect back to the person? Well, take this blog – I run it (with another member) for the purpose of expressing my views, ideas, and positions. I’m not establishing bedrock principles here as I’ve said time and time again that I’m not the golden standard of socio-economic opinions. I do it to share what I believe, usually from an economic viewpoint, and most importantly, from a conservative launchpad. We all have a base platform, whether its conservative or liberal, and it’s from that base that we grow and express our views. It’s from that base that we should teach. I’m here to share my opinions, to debate facts, to question norms, and to pose new ideas, but it’s not an exclusive proposition. I welcome conservatives here to learn information they can share, and just as important, I welcome liberals here to learn not only some of my interpretations of conservatism, but about the mixture of conservative views that do exist in the country today. While many from the “other side” will certainly walk away unmoved, they hopefully will have learned from the civil environment I promote as well as why I believe what I believe. Though economic analysis is in my “wheelhouse,” I’m sure now that because the election has passed, most of my writings and expression will center on philosophy and ideological ideas. Again, this is a time to educate, work together, conservatives and liberals alike, and to be resolute going forward.

In closing, this isn’t a call to arms. It’s a call to teach. What do I ask of you? Whether you’re a daily follower or a first-time reader, a liberal, moderate, or a conservative, subscribe to the blog. It costs nothing, and it might take 35 seconds of your time. There are numerous free options at the top right section of the blog, and no, you will never receive spam. Please choose whatever option (“Subscribe to this Blog” or “Follow by email”) works best for you. This isn’t a marketing ploy. It’s a simple recognition that this forum, this avenue, can be a wonderful place, even on a small, community-sized level, to effect the change, spread the message, and grow the community as we desire. This forum is a tool that can be used to help us grow.

So please, subscribe and start receiving email and RSS updates. Participate in our forums, share your beliefs, and tell others about them. When you learn something from here, share it… teach it. If you have something to share, teach it… defend it. Take away and bring ideas alike. I don’t want the country to be one sided. I don’t want it to be overwhelmingly left, and believe it or not, I don’t want it to be overwhelmingly right. I want it to be balanced, and I do see, however, the direction this country is going. If there is a compromise to be made, we aren’t going to make it if we are phased out, and we aren’t going to make it if our voice grows smaller.

Thank you to all who read this, and I look forward to sharing views, philosophies, and analyses going forward!

P.S. Vote in the poll on the left side of the blog – it helps give an idea of what people, both on the left and the right, think with respect to how the GOP should move forward.

I’m Barack Obama, and I’m Going to Deceive You in this Message

Do you think this title is harsh? Maybe. But is it true?

Absolutely.

If you watch his most recent ad, President Obama is using the same old lie: http://www.huffingtonpost.com/2012/10/12/obama-mitt-romney-tax-rate_n_1962187.html (the video is near the bottom).

Why is this deception? Well, I’ve written about that before… many times.

President Obama is trying to convince Americans that Mitt Romney paid a lower tax rate than they did. This is profoundly incorrect, and the most important evidence to back my point, (taken from my previous post linked above) is the following table found in this IRS document which contains pertinent tax rate data:

 Click Image for Expanded View

These data show the number of income tax returns filed in their respective income ranges (the number is in thousands). For example, in 2009, there were 18,696,000 tax returns filed where the filer earned between $20,000 and $30,000. In the image, you will notice some data is circled. The large red oval encompases incomes that are < $50,000 yearly. The green oval encompasses incomes that are > $50,000 yearly. I’ve expanded upon this in the chart below.

Click Image for Expanded View

You will notice some key pieces of data highlighted on this chart. The chart also distributes the two taxpayer buckets circled in red and green the IRS chart: those making < $50,000 per year, and those making > $50,000 per year.  The explanations are as follows:

– Yellow highlight: This is showing the breakdown of incomes for the overall taxpayer buckets. Those making < $50,000 comprise 92,889,000 of the 140,495,000 total tax filers, which is around 66% of the total. Many  people focus on the “50% mark” – the income at which 50% of Americans make more and 50% of Americans make less. This is around $40,000 per year.

– Green highlight: This highlight shows the final income tax rate paid by each group. As you can see, those making < $50,000 paid an average income tax rate of -2.59%, and those making above $50,000 paid an average income tax rate of 13.54%. Each income bucket shows the respective rate paid by those within the bucket. For example, those making between $30,000 and $50,000 paid an income tax rate of about 2.9% while those making $200,000 to $500,000 paid an income tax rate of about 19.5%.

– Red highlight: This highlight shows the final tax rate paid after payroll taxes (Social Security, Medicare/Medicaid, etc.) are factored in. You will notice that since these taxes are paid on the first $106,000 income, they affect those in the < $50,000 bucket more. For those in the upper income ranges, there is little change from their pre-payroll tax rate and after these taxes are applied. Regardless, when these taxes are factored in, those making < $50,000 (again, about 66% of the all Americans), paid a total tax rate of about 5.4%. You will notice that those making > $50,000 paid a total tax rate of about 18.7%. The true “middle income group,” those making between $30,000 – $50,000 yearly (the average American income falls in this range), paid a total tax rate of about 10.55%

All the data presented in this analysis is FINAL. All tax rates are final. This means that every rate is presented after loopholes, deductions, and write-offs.

Why is this all significant? Well, for starters, as stated,  President Obama tries to claim that Mitt Romney pays a lower tax rate than “you.” I have stated time and time again that this is simply deceiving. Mitt Romney paid around 14% of his income in taxes; 66% of Americans paid 5.94%. How can he be paying a lower tax rate than most Americans when most Americans pay a grand total of about 5.94% in federal taxes? Fact: he doesn’t. Mitt Romney paid a higher greater tax rate than most Americans. Period.

Additionally, I know there are many taxpayers out there that claim, “I make $40,000 and I paid a higher rate than Mitt Romney,” but, when looking at the whole picture, my answer to those people falls into one of two categories:

1. No you didn’t. Yes, while you have paid your taxes throughout the year, you had these taxes removed from your paycheck. And yes, it seemed like they were removing quite a bit (from my paycheck, around 27% is removed each time). What most people seem to forget is that lower income earners tend to receive large tax refunds (notice the large negative income tax rates for low-income earners above). These people often forget to factor refunds in, and these refunds reduce the FINAL RATE PAID significantly. Take a look at my tax return info and see how much I received in a refund. That refund reduced my tax rate quite a bit: http://loudmouthelephant.blogspot.com/2012/01/part-2-what-do-mitt-romneys-tax-returns.html

2.You’re a statistic anomaly. It’s that simple. IRS data, as seen above, shows that those making < $50,000 annually, the majority of Americans, do NOT pay a greater rate than 14%. If you are, for whatever reason you do, you’re a rare breed.

In summary, can someone please explain to me how Barack Obama’s claim of Mitt Romney paying greater tax rates than most Americans is true? The case does exist, but on such an insignificant level. The facts and data show that Obama’s claim is just plain false. This has been shown time and time again, but yet Team Obama keeps repeating the same lie. How can anyone be okay with this? Please share your thoughts below.

Who Should Get Credit for “Saving” the Auto Industry?

First, before I start, I need to get this out there: I was/am firmly against the auto industry “bailouts.” I don’t care who did it; I do not believe the government should have rewarded poor business decisions. It’s quite simple in my book. If you make good business decisions, you survive. If you don’t, you fail. By bailing out GM and Chrysler, the government ultimately mitigated risk away from a company and ensured that they would be preserved no matter how badly they performed. The cost of setting this precedent outweighs the short-term benefit of saving these companies. I wrote about this in one of my first ever blog posts: http://loudmouthelephant.blogspot.com/2011/11/too-big-to-fail-dangerous-precedent.html

But why am I writing about this now? For one, Vice President Joe Biden and Vice Presidential nominee Paul Ryan are set to debate tomorrow, and I’m sure this will come up. Joe Biden is often heard at campaign rallies touting the “Bin Laden is dead and GM is alive” line. Take a look: http://www.detroitnews.com/article/20120903/POLITICS01/209030369. He even said it in his DNC speech in Charlotte, North Carolina earlier this year: http://www.youtube.com/watch?v=bKCwQnIygcw

It’s interesting: President Obama tends to blame George W. Bush for the bad things he “left” us, but he doesn’t give Bush the credit he deserves for the good things. No, Obama tends to take credit for those himself in the most cherry-picked fashion he could. Never mind that the mission to hunt Bin Laden began under Bush, and Obama merely continued the task… I won’t even get into that. I want to talk about the claim that Obama saved the auto industry.

Going forward, I ask a simple question: how does one dole out credit for a success? Well, if I built 75% of a house, and my partner built 25%, I think I would get 75% of the credit and he would get 25%. Or heck, maybe I’d be a nice guy and say it’s even. That’s not the case the democrats are making with respect to “saving” the auto industry. In my opinion, Team Obama tends to think Americans are stupid. They champion the phrase, “we saved the auto industry” while also repeating, “Mitt Romney would have let them go bankrupt.” I will get to that later.

Let’s focus on some simple facts surrounding the auto industry bailout. According to this CBS article (read it here: CBS Fact-Checks DNC Speeches), the auto bailout was started by Bush. Out of a total of $17 billion given to GM and Chrysler, George W. Bush authorized the release of about $13 billion of it. According to the New York Times (Bush Aids Detroit), Bush even left Obama with a manageable situations with various options on handling the developing crisis. The Times article states, “The auto bailout plan sets ‘targets’ rather than concrete requirements about what those concessions may be, meaning that Mr. Obama and his advisers have enormous latitude to decide how to define long-term viability.” It sounds like George W. Bush did a swell job and even left Obama with options. In fact, with respect to whom spent the most money, Bush gave $13/$17 billion, and Obama gave $4/$17 billion. In my book, Bush should get about 76.5% of the credit, and Obama should get about 23.5%  It’s sad, however, that we don’t hear this discussed much in the media, and we constantly hear that phrase “Mitt Romney would have let them go bankrupt.”

So when the left talks about Mitt Romney’s recommendations, what are the referring to? As it turns out, Team Obama is referencing an op-ed Romney published in the New York Times (see it here: NYT Mitt Romney Op-Ed). Interestingly enough, Team Obama plays on the word “bankrupt,” again, while thinking Americans are stupid. They think that if Americans hear the word “bankrupt” they will feel the negative connotation behind it, forgetting the fact that it’s a regulated, potential company-saving instrument. Yes, Mitt Romney advocated for a restructuring of the automaker’s business operations, and most importantly, he called for new leadership. He said:

– “Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.”

Perhaps the last line of the article is the most important:

– “In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.”

You know who else advocated for the auto industry to go through bankruptcy? That’s right: President Obama. As seen in the CBS article highlighted above:

– “Where Mr. Obama put his real stamp on the bailout was setting the parameters in March 2009, allocating General Motors and Chrysler an additional $4 billion in exchange for agreeing to major restructuring of their operations…

Bankruptcy was not off the table for Mr. Obama: in his March 2009 restructuring announcement, Mr. Obama gave GM and Chrysler one month to shape up or face bankruptcy. In fact, Chrysler did file for bankruptcy at the end of April 2009, GM shortly thereafter, though both emerged from bankruptcy stronger than before.”

Wait?! WHAT?! President Obama “let Detroit go bankrupt?!” Yes, you read it correctly: President Obama and Joe Biden, while thinking that Americans are sheer suckers (there really is no other way to put this), gave a minority amount of bailout cash to the automakers and chastised Mitt Romney, all while implementing the EXACT SAME program that Mitt Romney himself suggested.

To go “off the cuff,” I just want to say, “come on, President Obama. Do you really think you can fool us?” I fear, based on how many times I see Team Obama’s “we saved GM” claim on Facebook, I think he believes he can. Please, Paul Ryan, when Joe Biden comes out with his deceitful little quip, be sure to give him a cold bucket of water known as facts.

Yes, facts are facts, truths are truths, and I think it’s my job to pass this one on. What do you think? Please share this with a friend.

Barack Obama Continues to Lie About Taxes – Part 2

Part 1 can be seen here: http://www.conservativedailynews.com/2012/09/barack-obama-continues-to-lie-about-taxes-part-1

Let me start by saying that my grandmother used to tell me that if any part of anything I say is a lie, if there is anything that can be pulled out that isn’t true… then I’m lying. Keep that in mind. Deceit is deceit.

Well, what about hypocrisy?

The quick answer: There is no difference.

What am I getting at? Well, as you saw in Part 1, Obama has been lying to the American people about the tax rates the average American pays. Part 2 focuses on how he acts hypocritically by calling out Mitt Romney and the wealthy for using “loopholes,” “write-offs,” and “deductions” to pay less in taxes while he himself uses these very tax law tools. Not only does Obama uses these instruments of tax avoidance himself, but he uses them at a higher rate than Mitt Romney. Yes, you read that correctly: Barack Obama is better than Mitt Romney at using “loopholes,” “write-offs,” and “deductions” to pay less in taxes. But don’t take my word; let’s look at Mitt Romney’s and Barack Obama’s tax returns. Since the dust hasn’t officially settled on Mitt Romney’s 2011 returns (he allegedly paid more in taxes than he had to), we will use his and Obama’s 2010 documents for this analysis.

Here is President Obama’s 2010 tax return: http://www.whitehouse.gov/sites/default/files/rss_viewer/POTUS_taxes.pdf (If this sounds a little facetious from here on out, please forgive me; you have to understand the sheer joy a conservative feels when showing just how hypocritical the left truly is).

Start by focusing your attention on page 1, line 22 – Total Income: $1,795,694 (and oh yeah, Barack Obama is in the 1% the left love so much to hate).

Next, look at adjusted gross income (AGI), line 37 at the bottom of the page: $1,726,096. What’s that?! He reduced his income by 1.69x the average American yearly income. Don’t worry; there’s more.

Go to the second page, near the top. Line 40 – Itemized deductions: $373,289. Holy cow! You mean Obama has used the current tax code, just as Mitt Romney has, to reduce his taxable income?

Line 43 shows the “smoking gun” – Taxable income: $1,340,247. Ta-da! President Obama has reduced his taxable income from the original $1,795,694 to $1,340,247, or by 25.4%!!!

Now let’s take a look at Mitt Romney’s 2010 tax return, and I can make this quick: http://thorndike.com/wp-content/uploads/2012/01/Romney1040-2010.pdf

Page 1, line 22 – Total Income: $21,661,334

Page 2 (it’s further in the document) Line 43, Taxable income: $17,120,067

To make sure we are comparing apples to apples, this means Mitt Romney reduced his taxable income by $4,541,267 or only 21%!!!

So when it comes to who is the biggest player of the US tax game… who reduces their income by more… who skirts the system by using these “loopholes,” “write-offs,” and “deductions” the most, not only is President Obama playing the same game… he plays it MORE. He plays it better. He does all this while deriding Mitt Romney and the wealthy… all while doing it with a straight face. If this isn’t a double standard, I don’t know what one is.

Barack Obama Continues to Lie About Taxes – Part 1

I’ve written about this often: It seems that President Obama is taking the “throw it at the wall and see what sticks” approach to his campaign ads. This means that he is making claims, regardless of how false they are, and hoping they get enough viewership without the average American even checking on the validity of these claims themselves. Team Obama hopes that if repeated often enough, the electorate will simply believe these claims, without question, ultimately voting for a president based on lies and misinformation. For additional examples, see this post: http://loudmouthelephant.blogspot.com/2012/06/fill-in-blank-obama-campaign-is-based.html. In fact, I highlighted the “science” behind the President’s campaign strategy here: http://loudmouthelephant.blogspot.com/2012/06/obama-campaign-deceit-machine-rolls-on.html

In Obama’s newest campaign ad, he goes right after Mitt Romney and his tax rate. First,… why??? What in the world does this have to do with anything? Does Obama really think the American people are dumb enough to focus on Romney’s tax rate while ambassadors are getting mauled, 23,000,000 people are unemployed, and the national debt climbs to astronomical levels? I won’t answer that. Moving on and focusing on the facts that debunk Obama’s ad, let’s get some things straight:

– Mitt Romney has done NOTHING illegal. Nothing.

– Mitt Romney has paid every bit of taxes required of him.

– Mitt Romney has paid more in taxes in one year than an average American would pay in 448 years of work.

– Most importantly: Mitt Romney DID pay a higher tax rate than most Americans – I will address this specifically.

Let me see if I understand this: President Obama puts out the ad above and, in short, the ad uses creepy music and words like “probably” to make a claim about a guy who has done nothing wrong, all while lying about the tax rates of all Americans?

Okay, I will answer my own question: Yes, Obama truly does think Americans are that stupid. Allow me to elaborate.

First, with regards to the “Mitt Romney probably paid a lower tax rate than you” claim, did you notice the most important word? Of course, it’s “probably.” Why does Team Obama use that specific word? One simple phrase answers this question: “Plausible deniability.” Why didn’t Obama just say, “Mitt Romney paid a lower tax rate than you?” Answer: Because Obama knows this is absolute baloney. His campaign can twist their claim any way they want… IF and when the American people question it. Team Obama hopes and knows they won’t. Using the word “probably” is like an insurance policy. Just in case a fire storm does hit, the Obama campaign cannot get nailed for being entirely dishonest.

To understand this overall picture, I submit to you: When you’re putting out a claim to the country as a whole (the “probably paid more than ‘YOU’ part”), you’re implying that > 50% of people fall in to the category. You can’t claim “you” if it’s one in 100 people. So yes, when Obama claims, “Mitt Romney probably paid a lower tax rate than you,” he is implying Mitt Romney paid a lower tax rate than most people. Hmmm. I want take a brief step back to some internet propaganda I analyzed earlier this year. Back in March, I investigated the ridiculous claim of Mitt Romney’s versus a teacher’s tax rates.

What does the data show? It clearly says that yes, IRS data confirmed that “millionaires and billionaires” do not pay lower tax rates than the middle class. For those claiming “well, this doesn’t include payroll taxes…” You’re right. It doesn’t. But payroll taxes are a total of 7.65% of the first approximately $110,000 of earned income (BEFORE the payroll tax holiday). This means that for the average income, which is about $40,000, an American tax payer paid an income tax rate of 6.00% and a payroll tax rate of 7.65%. The conclusion: an average taxpayer pays about 13.65% in total federal taxes. Keep in mind this is the average. It’s a safe judgement to assume approximately 50% of Americans make more than and 50% of Americans make less than this average. Well, economics and math aside, if the majority of the country pays a tax rate of 13.65%, how can Mitt Romney pay a lower tax rate than most Americans when he pays around 14%? Keep in mind, these figures account for those Americans that DO pay taxes. When you factor those in that do not, all those Americans paying nothing significantly bring down the American average.

Now that the first Obama tax lie is debunked in theory, let’s talk about it in practice. Of course, as a good conservative economist, I wanted to look at some real IRS data to back my claim.

My analysis follows. First, be sure to look at the specific IRS tax data report I used for this analysis: http://www.irs.gov/pub/irs-soi/12inwinbulratesshare.pdf

Let’s take a look. First, and this is a quick side note… we constantly hear the claim, 47% of Americans pay no taxes. Well, the opening line of the IRS report says the following:

“Taxpayers filed 140.5 million individual income tax returns for Tax Year 2009. Of those, 81.9 million (or 58.3 percent) were classified as taxable returns. This represents the lowest percentage of taxable returns in more than 24 years. A taxable return is a return that has total income tax greater than $0.”

What?! That means, if we assume the US has about 310,000,000 people, that yes, about 54-55% didn’t even file tax returns (this is given as a range because the number could be different due to joint tax returns), but there is an even more important stat here: Only 81,900,000 of those paid taxes. So out of 310,000,000 people, only 26.4% had income tax to pay? How can this country be sustained when nearly 3 out of ever 4 people doesn’t even pay income tax? Perhaps the argument is, “73% of Americans pay no income tax, if you add payroll taxes (Social Security and Medicare taxes) in, 47% still pay nothing? Hmmm.

Anyway, the glaring charts that stand out in the IRS data are Figures B and B1. Take a look:

(Click on image to zoom in)

What do you notice? Ahhh yes… truth and fact. This shows the average tax rates of the 81.9 million who DID pay taxes. Yes, this means that the people who did not pay taxes have had their figures removed, no longer bringing down the average. So out of all remaining taxpayers, for example, the average American making $30,000 – $50,000 per year paid a final tax rate (again, notice total income tax), of 6.4%. This is a different income range “bucket” from the discussion above, but it does paint the same picture.

 Now lets look at ALL TAX FILERS- including those who actually did file a tax return and didn’t pay any tax (about 41.7% of all tax filers). Check it out:

(Click on image to zoom in)

So… what did we find? Factoring in ALL TAX FILERS, the average American making $30,000 – $50,000 per year (this chart shows ALL income earners), paid a final tax rate of 2.9%. This means that even if you added in the 7.65% payroll tax rate, the average final tax rate of someone earning between $30,000 – $50,000 is 10.55%.  Did you notice anything else? Yes, many people get more in a tax refund than they paid in total income tax. These people essentially receive tax payments from the government.

Why did I highlight the $30,000 – $50,000 income range? Well, though this data is slightly outdated, the average American earns about $40,000 each year (it’s safe to assume this hasn’t changed drastically since): http://en.wikipedia.org/wiki/Personal_income_in_the_United_States. To me, that’s the standard. If you claim, “Mitt Romney probably paid a lower tax rate than you,” I respond with an question of, “what did the average income earner pay?”

In simple conclusion, as the bright-as-the-sun data have shown, since the average American did not pay anything close to the rate that Mitt Romney did, how can this claim by team Obama be anything but a lie? Every American needs to see this before they simply believe another Team Obama lie.

Part – 2, a summation of how President Obama vilifies Mitt Romney (and the wealthy in general) for using “loopholes,” “deductions,” and “write-offs” to reduce his taxable income while doing it more and to a greater extent, can be seen here: http://www.conservativedailynews.com/2012/10/barack-obama-continues-to-lie-about-taxes-part-2/