The latest WSJ tax/income sophistry

Today, the Wall Street Journal editorial page trumpets the "the gusher of revenues flowing into the Treasury in the wake of the 2003 tax cuts" and claims that "millions of Americans [are] moving into higher tax brackets":

This would all seem to be good news, but some folks are never happy. The same crowd that said the tax cuts wouldn't work, and predicted fiscal doom, are now harrumphing that the revenues reflect a windfall for "the rich." We suppose that's right if by rich they mean the millions of Americans moving into higher tax brackets because their paychecks are increasing.

However, the Center on Budget and Policy Priorities found that "the average incomes of the top one percent of households experienced a jump of almost 17 percent" after inflation between 2003 and 2004 while "real median income fell." Similarly, The Economist notes that, "[a]fter you adjust for inflation, the wages of the typical American worker—the one at the very middle of the income distribution—have risen less than 1% since 2000. In the previous five years, they rose over 6%." So who are these millions of Americans?

And what happened to the 2001 tax cut anyway? According to the Treasury Department and the Wall Street Journal, Bush's economic policy history apparently begins with the May 2003 tax cut. The previous two years of declining employment and revenue have been disappeared. Maybe they're in one of those secret CIA prisons?

Finally, the alleged "gusher" of tax revenue is largely illusory. As the Center on Budget and Policy Priorities states, "[r]evenue growth over the current business cycle has been lower than in comparable past periods; in fact, revenue growth over the current business cycle is near zero after adjusting for inflation and population growth."

I'll say it over and over again: never trust the Wall Street Journal editorial page. Never.

Comments

[James Bourke]

The "millions of Americans" claim is misleading, to be sure, but it may not be false. According to Wikipedia, there are about 113,146,000 households in the US. While the pluralization may be unjustified, 1% of that is still over a million households. If the next few highest percentiles are also experiencing significant jumps, then the WSJ can make its claim. I agree that a more comprehensive examination belies the claim that the tax cuts have been good for most Americans, but strictly speaking the WSJ may not be making a false claim re: the millions of Americans experiencing greater incomes.