To explain the GOP tax bill’s impact on personal finances, media organizations and politicians have been using examples of typical households that will be affected. Maybe you recognize them: The family with a couple of million-dollar California houses. A husband and wife with $40,000 in non-wage income. That elderly couple down the block—you know, the one with $30 million in assets.
In defending the law passed on Wednesday, Texas Sen. John Cornyn tweeted:
Under #TaxCutsandJobsAct a married couple earning $100,000 per year ($60,000 from wages, $25,000 from their non-corporate business, and $15,000 in business income) will receive a tax cut of $2,603.50, a reduction of nearly 24 percent.
A 24 percent tax cut! A good deal, if you and your wife have $15-an-hour jobs but pull in $40,000 from two types of business income. Or, as my colleague Jamelle Bouie put it on Twitter, a “normal family.”
To be fair, Cornyn shared two other examples that come much closer to being “normal”: a family of four earning $73,000 and a single parent with one child earning $41,000—both households could see their taxes cut in half. But as Republicans attempt to convince voters their tax plan isn’t designed to favor the rich, these odd examples are not helping their case.
On the Today Show, House Speaker Paul Ryan boasted that the average tax cut for a family of four would be $2,059. The author Molly Knight responded: “Barry Bonds and I hit an average of 36.5 home runs in 2001.” Economist Richard Thaler got in on the act: “Rafa Nadal and I have an average of 5 French Open titles.” (Thaler and I have an average of .5 Nobel Prizes, by the way.)
The point being that statisticians use the median, not the average, to illustrate what’s typical. When it comes to household earnings, the distinction isn’t trivial: Mean family income in 2016 was $97,000. Median family income was closer to $73,000. Median household income (including non-families) was another $14,000 lower still.
It’s not just Republican politicians, though. Media organizations have been much more conspicuously lopsided in their examples. That grandma and grandpa who own a 30-unit apartment building come courtesy of USA Today, whose explainer also included two middle-income families, a single person earning $50,000, and a single person earning $1 million.
The Wall Street Journal profiled the median household (a family earning $59,000), as well as:
• Married Texas oil executive making $600,000 a year
• Single Virginia business owner making $300,000 a year
• Single California professional with one child making $100,000 a year
• Married Iowa couple with two children making $90,000 a year (the Iowa couple incurs a $40,000 medical expense).
Bloomberg, working with Tim Steffen of Baird Private Wealth Management, divided taxpayers up eight ways.
• The Multimillionaires in New York
• The Second-Home Scenario in California
• The Small Business Owners in Pittsburgh (adjusted gross income 300k)
• The Suburban Family in Westchester (AGI $270k)
• Single in Manhattan (AGI $130k)
• Married in Austin (AGI $100k)
• Median Income in Oregon
• Renting in Milwaukee
Only the Milwaukee family represents the bottom half of earners in America.
What’s going on here? Is the media hopelessly out of touch? If half the country is making less money than all but one of these examples, shouldn’t we find out what happens to their tax bill too?
One reason to answer that question in the negative is that so many of the most consequential changes involve people with high incomes. All changes to deductions, for example, only affect people who itemize their deductions (almost always high earners)—and within that group, only the subset whose deductions topped the new, doubled standard deduction. And this means that if your income is in the bottom half, your tax return won’t showcase many of the ways the law is changing.
And another reason to answer no is because ultimately this panoply of movers and shakers with multiple houses and pass-through income is a pretty good representation of where the money is. Remember, the top 1 percent of the U.S. population has 35 percent of the country’s net worth, while the bottom 60 percent has 3 percent of the net worth.
So when we look for examples to illustrate the tax code, it makes sense to use a bunch of pretty wealthy families, because the big picture is that nobody else really has very much money.
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