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What The Media Tell Americans About Free Enterprise

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October 1996


Media Tweak Tax Facts
Guest Editorial, by Stephen Gold

Many journalists swarmed like hornets after the first presidential debate, their stingers aimed at a Bob Dole soundbite statistic. Maybe the numbers seemed implausible to them. Maybe they deemed Dole's private source for the statistic less reliable than comparable government sources. Or, just maybe, they were simply expressing their kneejerk bias against conservative economic principles.

Whatever the reason, the day after the first debate, several media outlets challenged Dole's Tax Foundation inspired statement that the average American household today pays more in taxes than it does for food, clothing, and housing combined.

In a frontpage story, for example, the Los Angeles Times hinted at a Dole blunder. The article related that while Dole relied on a conservative think tank for his data, "the Bureau of Labor Statistics' consumer expenditure survey found that the average household spent more than twice as much on food, clothing and shelter as on taxes in 1994." Eric Engberg of CBS News was more forthright in his analysis. Asserting that "some [of Dole's] facts got mangled," Engberg stated the GOP nominee's claim was an "exaggeration" that could be disproved by the Bureau of Labor Statistics (BLS) study.

Ironically, while these and other news organizations used the opportunity to show how Dole, in the words of the Times, was "tweaking" the truth to his advantage, it appears the media were doing the same thing. By accepting the BLS data as unimpeachable, the reporters made an error of such magnitude that, if committed by either of the presidential candidates, it would have made frontpage news nationwide.

The problem is the BLS survey greatly understates taxes paid. While the national survey is considered an accurate portrayal of consumer expenditures, in the tax category the report only covers individual income taxes (federal, state, and local), real and personal property taxes, and an amorphous category called "other taxes."

Among the most recognizable omissions from the survey: Social Security taxes paid. While the BLS survey doesn't have a category for such payments, the Tax Foundation estimates that the average household will pay about $1,100 for the employee's share of payroll taxes alone this year. Similarly, the BLS survey doesn't specifically report sales and excise taxes paid. In the only entry in the survey in which these taxes might fit ("other taxes"), households earning between $50,000 and $69,000 are said to pay $77 annually. By comparison, based on Bureau of Economic Analysis (BEA) data, the Tax Foundation estimates that households in that income group average over $2,000 in federal, state, and local sales and excise taxes paid.

Also, the BLS survey results altogether ignore the effect of indirect levies, such as business taxes, on American society. Unlike the survey, the Tax Foundation incorporates all taxes at all levels of government in its annual analysis, including those levies hidden from taxpayers. For example, business taxes (including corporate income taxes) must be borne by the general population somehow, whether through lower wages for workers, lower shareholder dividends (which harms anyone with a pension fund), or higher consumer prices. So, while the typical American won't ever see a tax bill for these taxes, they're certainly paid by everyone.

In total, the BLS survey relied on by so many reporters to knock Bob Dole's argument for lower taxes understates total taxes paid by more than four times, according to the Tax Foundation's analysis based on BEA data.

The flaw here isn't the BLS survey. It lies in the way the survey's results were used by reporters. The search for truth by the media is undeniably critical, especially during an election year. Unfortunately, the public is hurt when reporters, to prove a point, choose to accept certain economic premises without verifying their legitimacy.

Stephen Gold is associate director and communications director of the Tax Foundation.


Rich Noyes


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