Friday, July 01, 2011

PolitiFlub: Obama & tax rates on hedge fund managers

Just a little reminder regarding the way PolitiFact defines its grading system:
True – The statement is accurate and there’s nothing significant missing.
Mostly True – The statement is accurate but needs clarification or additional information.
Half True – The statement is accurate but leaves out important details or takes things out of context.
Barely True – The statement contains some element of truth but ignores critical facts that would give a different impression.
False – The statement is not accurate.
Pants on Fire – The statement is not accurate and makes a ridiculous claim.
Not that PolitiFact is entirely consistent (yellow highlights added):
TRUE – The statement is accurate and there’s nothing significant missing.

MOSTLY TRUE – The statement is accurate but needs clarification or additional information.

HALF TRUE – The statement is partially accurate but leaves out important details or takes things out of context.

BARELY TRUE – The statement contains an element of truth but ignores critical facts that would give a different impression.

FALSE – The statement is not accurate.

PANTS ON FIRE – The statement is not accurate and makes a ridiculous claim.
I wonder how much longer they'll let the discrepancy ride?  But on to the point, regarding a rating very recently given to President Obama for the following statement:
"If you're a -- if you are a wealthy CEO or a … hedge fund manager in America right now, your taxes are lower than they have ever been. They're lower than they've been since the 1950s."
The conclusion from the same story:

(W)hen Obama said that "if you're a … wealthy CEO or a … hedge fund manager in America right now, your taxes are … lower than they've been since the 1950s," he's close: Their tax rates are at or near the lows for the years elapsed since then.

The top marginal income tax rates were lower between 1988 and 1992 than they are today, but otherwise, Obama is right. They were higher for the other years. Meanwhile, the rates that are used to tax carried interest for hedge-fund managers have been at historical lows since 2003. And effective tax rates for high-income earners were either at their lowest since 1960 or very close to their lowest (at least according to the most recent data available). On balance, we rate Obama’s statement Mostly True.
Think about what PolitiFact just explained.  Obama's statement is not correct in terms of the top marginal tax rate.  Marginal rates "were lower between 1988 and 1992."  And supposedly the effective tax rates on the highest earners were "either at their lowest since 1960 or very close to their lowest."   To verify Obama's claim, PolitiFact chose a study featuring an annualized spot check for "average federal tax rate" which may not even be the same thing as the effective tax rate.  But PolitiFact could have used a Tax Policy Center study of effective tax rates published a few months ago that would have contradicted Obama's claim.

Note that PolitiFact found Obama "Mostly True" on its Truth-O-Meter.

Note again the definition of "Mostly True":  "The statement is accurate but needs clarification or additional information."

So PolitiFact judges that an inaccurate statement is accurate.

Welcome to the wonderful world of PolitiFact fact checking.

2 comments:

  1. I'm totally willing to believe that I'm missing something here. I don't see how the link to the Tax Policy Center Report, contradicts Obama's claim. The page that the link leads to shows that effective tax rates have fallen steadily since 1979. I'm I supposed to be looking at a different part of the report?

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  2. Matt,

    The year 1986 is lower for all the high tax brackets that PolitiFact saw fit to assume for application to CEOs and hedge fund managers. And I'm not sure what part of the page you could turn to in supporting the thought that effective tax rates "have fallen steadily since 1979." It's far easier to find fluctuations that support the notion that tax rates have been higher than in 2007 since 1979.

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