A Comparison of Tax Distribution Tables: How Missing or Incomplete Information Distorts Perspectives

Abstract

Comparing tax distribution tables released by several different organizations, this study discusses how the design and presentation of data within tax distribution tables can be designed and presented in manners which fail to advance a balanced and accurate perspective of tax policy. Unless there is greater public recognition of both the art and the science of distributional analysis, tax policy will be unduly influenced by incomplete or misleading tax distribution tables. Although what is considered fair or equitable depends on philosophical and ethical judgments over which people can disagree, this study shows how the presentation of tax data within distribution tables often hides or omits much of the important information that is required in order to effectively evaluate the merits of any tax legislation. The debate surrounding President George W. Bush's tax plan of 2001 provides a prime example of how the use of tax distribution tables can provide an incomplete picture. Numerous distribution tables were prepared by governmental organizations, advocacy groups and think tanks. These tables were routinely published in major newspapers around the country. However, without a proper understanding of what these distribution tables did and did not show, many important issues were misinterpreted or ignored altogether. These same issues are sure to rise again as tax policy proposals are debated during the 108th Congress and beyond. By comparing distribution tables that provide alternative perspectives of President Bush's tax plan of 2001, this study examines how tax distribution tables often can provide misleading results about the impact of pending tax legislation. These tables rely excessively on comparisons of various income groups and are typically used to oppose broad income tax relief and foster class warfare notions in tax policy. However, tax distribution tables typically are defective in several ways that once recognized raise serious questions about their value to policymakers and the public.