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News Wednesday, Jul 8 2015

NPR On Bush's 36% Tax Rate: "That's not close to true."

Jul 08, 2015

Unsurprisingly, NPR is out today with more evidence that Jeb Bush isn’t telling the whole story on his tax rates. According to NPR, Bush’s average effective rate is 24.5 percent, not the 36 percent he claims, writing: “That’s a confusing number, and it obscures three decades in which Bush’s income climbed slowly, then explosively.” On top of that, Bush paid a 36 percent tax rate for only 8 of the 33 years of returns released. Financial planner Michael Kitces used slightly different figures and found Bush had a 21.3 percent rate.

Bush’s release may have been branded as an act of transparency but it’s misleading at best — at worst, it’s manipulative.

From NPR:

Jeb Bush released more tax returns than any presidential candidate in history. Over 33 years, the former Florida governor’s campaign said he paid an average effective tax rate of 36 percent.
…depending on how you calculate it.
That’s a confusing number, and it obscures three decades in which Bush’s income climbed slowly, then explosively.
To come up with Bush 36 percent number, the Bush campaign did a straightforward calculation, adding up his total taxes from 1981 through 2013 and dividing it by all of the income he earned in those same years.
That’s simple enough, but it makes that headline “36 percent” figure easy to misunderstand. For one thing, saying it was his “average tax rate” could suggest that he, in fact, paid an average of 36 percent each year — that is, that he paid something around 36 percent each year.
That’s not close to true.
Really, he paid more than 36 percent in only eight of those years. (Meanwhile, in four earlier years, he had either zero or negative taxable income.)
Not to get too wonky, but one might more precisely call this figure Bush’s total effective rate from 1981 to 2013. The average effective rate, simply adding together all the rates and then averaging them out, was more like 24.5 percent.
Kitces was the first to do something like this — using slightly different figures from the Bush tax returns, he came up with a 21 percent rate.
And that’s how effective tax rates work — no one talks about or thinks about their total tax rate over time, because income changes year by year, as do tax brackets (not to mention the tax laws governing those brackets). Adding them up over time doesn’t really say anything meaningful.

Published: Jul 8, 2015

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