Department of Awful Statistics

It's one of the most common errors in discourse today: comparing average tax rates to marginal tax rates.  David Henderson thinks he catches it in a letter to the Wall Street Journal:

Notice that Dr. Palmer computes Obamas' and Bidens' tax rates to the first decimal point but gives his own rate as 28%, which just happens to be the marginal tax rate that a fairly successful doctor with a non-earning wife and a few kids would be paying. [In 2010, the rate for a married couple filing jointly was 28% for taxable incomes up to $171,850.] Is it possible that Dr. Palmer is comparing his marginal rate with the Obamas' and Bidens' average tax rate? I think so. The right comparison is average vs. average or marginal vs. marginal. If he had done that, he would have found that his 28% marginal rate compares with the Obamas' and Bidens' marginal tax rates of 35% and that their 26.6% and 22.8% average tax rates compare with Dr. Palmer's approximately 20% average tax rate.

Marginal thinking is important!  But so is comparing apples to apples, and oranges to oranges.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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