Chart of the Day: The Case for Higher Taxes?

A popular chart likens the national budget to a household in order to argue for taxing the wealthy, but it's an imperfect messenger.


Here's an interesting chart that's been bouncing around Facebook and other social media outlets for a while. This version, posted by the activist group The Other 98%, has nearly 2,000 shares as of writing.

Let's say from the start that this is a witty, clear way of talking about it, and it's got a sharp point that will resonate from many liberals. And let's say also that any time you're trying to deal with a topic as vast and complicated as the federal budget, a certain level of simplification is necessary. With that out of the way, the chart is misleading in several ways.

  • First, it pulls a bit of a fast one on the reader from the start. The second and third lines break up percentage of income earned between the top 20 and bottom 80 percent, but the taxation numbers apply to the top 1 percent and bottom 99. If you're not reading carefully, that makes the disparity in what the 1 percent and the 99 percent pay seem larger than it really is.
  • Second, the two-earner model doesn't really make sense as an analogue to the national budget. Sure, the wealthy make more and pay a (comparatively) smaller percentage of total tax revenue, but there are many, many more of the 99 percent than there are the 1 percent (obviously), so trying to assign those values to an individual "mom" and an individual "dad" doesn't really make sense.
  • Third, this assumes a total household income of $281,394145,800, which is because the author chose to lop off eight zeros for simplicity. It's understandable, but a little jarring, since that would put this income in the very comfortable 96 88 percent.

And one last caution. The problem with a chart like this is that the easy retort is: Well, OK, why don't you just cut household expenses by $16,500? In a household, the family would have to cut expenses to whatever the could pay (or, realistically, cut down other spending on eating out, travel, and so on) to make up the gap, or else risk bankruptcy and homelessness. The Other 98% put this caption on the image:

Plutocrats tell us to treat our national budget like a "family budget." Instead of explaining why this doesn't make economic sense, let's take them up on their offer - and ask why we're not spending any money on our children's education, Mom's commute or Grandma's surgery, but instead wasting it on Dad's trip to Vegas.

Quite so. For governments, unlike households, it's generally OK -- and sometimes beneficial -- to take on debt, for the same reasons that corporations often take on debt. That's perhaps particularly true at a time of super low interest rates. The debate among economists on the left and right isn't really over whether it's OK for the government to owe money, but about what level of debt is healthy. If people don't read the caption, the chart may give the opposite impression of what it's aiming for.

Of course, it's mostly meant to make a quick political point -- and that it does.

Image: Facebook