Monday, February 08, 2010

Grading PolitiFact: Obama says he cut taxes for 95 percent

Sometimes I can't believe what I'm reading.  And that is a concern when I'm reading material that claims to be checking the facts of others.

The issue:

The fact checkers:

Angie Drobnic Holan:  writer, researcher

Amy Hollyfield:  editor


Writer/researcher Angie Drobnic Holan accurately conveys the context of President Obama's remarks.  Mr. Obama was highlighting the steps he took to bolster the economy.  I'll provide additional context since the underlying argument, if any, may arise from other portions of the context.
Now, as we stabilized the financial system, we also took steps to get our economy growing again, save as many jobs as possible, and help Americans who had become unemployed.

That's why we extended or increased unemployment benefits for more than 18 million Americans; made health insurance 65 percent cheaper for families who get their coverage through COBRA; and passed 25 different tax cuts.

Now, let me repeat:  We cut taxes.  We cut taxes for 95 percent of working families.  (Applause.)  We cut taxes for small businesses.  We cut taxes for first-time homebuyers.  We cut taxes for parents trying to care for their children.  We cut taxes for 8 million Americans paying for college.  (Applause.)

I thought I'd get some applause on that one.  (Laughter and applause.)

As a result, millions of Americans had more to spend on gas and food and other necessities, all of which helped businesses keep more workers.  And we haven't raised income taxes by a single dime on a single person.  Not a single dime.  (Applause.)
(Yellow highlights added)

Obama argues that he cut taxes in a way that stimulated the economy. That is his underlying argument. But this is yet another instance where PolitiFact has no interest in the underlying argument. Drobnic keeps a narrow focus on the 95 percent figure.

Here, we wanted to check Obama's statement that he cut taxes for 95 percent of working families.

The key word in his statement is "working." Obama's claim is based on a tax cut intended to offset payroll taxes. Under the stimulus bill, single workers got $400, and working couples got $800. The Internal Revenue Service issued new guidelines to reduce withholdings for income tax, so many workers saw a small increase in their checks in April 2009.
So Drobnic thinks the 95 percent figure comes from a tax cut intended to offset payroll taxes.  Can she back it up?
The tax cut was part of Obama's campaign promises. During the campaign, Obama said he wanted $500 for each worker and $1,000 for working couples. Since the final number was a bit less than he promised, we rated his promise a Compromise on our Obameter, where we rate Obama's campaign promises for fulfillment.

During the campaign, the independent Tax Policy Center researched how Obama's tax proposals would affect workers. It concluded 94.3 percent of workers would receive a tax cut under Obama's plan based on the tax credit to offset payroll taxes. According to the analysis, the people who wouldn't get a tax cut are those who make more than $250,000 for couples or $200,000 for a single person. Obama said he intended to raise taxes on those high earners, a promise he reiterated during the State of the Union, and that revenue would offset the stimulus tax cut.

Because the stimulus act did give that broad-based tax cut to workers, we rate Obama's statement True.
True, eh?

Drobnic's evaluation contains a serious and (I think) obvious error.  She used a Tax Policy Center report on a campaign proposal to verify the effects of a tax policy that differed from the one made during the campaign.  Now, it is possible that simply reducing the dollar amounts of the benefit would not affect the percentage of workers who received a tax cut.  Plus, if the Tax Policy Center was interested in evaluating the effects of a tax proposal from the campaign, then perhaps a separate analysis exists for the tax policy that actually emerged from the stimulus bill.

After the campaign, the independent Tax Policy Center researched how the "Making Work Pay" tax credit--the stimulus bill version of the earlier proposal--would affect workers.  It concluded that 73.7 percent of workers would receive a tax cut.  Do compare this report with the one cited by Drobnic featuring the 94.3 figure.

Why did Drobnic use the wrong backing information?  She could have used a report covering all the tax provisions of the stimulus bill to obtain a figure of 93 percent.  And that would be close enough to Obama's figure to support her finding of "Mostly True" while continuing to ignore Obama's underlying argument.  Overwork may explain it.  PolitiFact engaged in a frenzy of activity following the SOTU speech.

The grades:

Angie Drobnic Holan:  F
Amy Hollyfield:  F

I'm adding the tag "journalists reporting badly" to this one.


About that underlying argument.

Part of the PolitiFact failing, of course, was the apparently deliberate effort to ignore Obama's underlying argument.  To be sure, evaluating the whole of the tax policy as to its benefits would present quite a challenge.  Nobody really knows for sure what effect various tax policies have on the economy.  Reality is too complex to pin down when it comes to economics.

That said, we can still question whether Obama's claimed tax cut for 95 percent of workers is a misleading claim.  The key aspect of stimulative tax cutting is the net effect of the tax policy.  What do I mean by that?  Suppose I do an across the board tax credit of one cent for all working Americans.  I can then claim that I gave a tax cut to all Americans.  But if at the same time I turn around and sock the middle quintile with a five percent hike in its federal income tax rate, my claim of providing a tax cut for all Americans is basically a big lie.  The net effect of the two policies is a tax increase, with the burden falling squarely on the middle class.

The president's claim features some problems in common with my illustration.  Note that he claims income taxes were not increased, not even by a dime.  But Obama did increase taxes in at least one case, levying an extra 39 cents on each pack of cigarettes.  For a pack-a-day smoker, that's about $140 per year--over a third of the "Making Work Pay" credit for an individual worker.

Any other tax increases would add to the cigarette tax and start to pare down that 93 percent figure from the Tax Policy Center in terms of net federal taxation.


  1. i would like to point out a problem with the tax institute numbers you cite. they seem to have averaged all the brackets as though they had the same number of people in them. that isn't the case, is it? what they relate as 73.7% doesn't seem to represent actual people, but an average percent of payers out of each quintile.

  2. It actually *is* the case that each quintile will either have an equal number of persons in it or so close that it hardly matters. A quintile is a percentage (20%).
    As problems go, that one's pretty minor. Thanks for stopping by to comment! :)

  3. Somebody using oriental characters to represent their name wrote:
    "We could learn a lot from crayons. Some are sharp, some are pretty and some are dull, Some have weird names , and all are different colors, but they all have to live in the same box."

    Hopefully some crayons are relevant. I'm taking your post as spam.


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