Posted by Bob Lord
And an intellectually dishonest one at that.
Every time I hear Joe Scarborough speak about taxes, it amazes how a guy who served in Congress could be so fundamentally ill informed, so willfully ignorant of how the laws he repeatedly voted on actually work.
Today, Joe fumed about Obama's tax return, which revealed that Obama's effective tax rate was 18% on income of about $609,000. That was "mind-boggling hypocrisy" according to Morning Joe.
"This President plays class warfare for a year and a half on the campaign trail. Let's keep this graphic up. He attacks Mitt Romney for paying a lower tax rate than school teachers, repeatedly. Democrats repeatedly attacked Mitt Romney for paying a lower tax rate than teachers, than Warren Buffet's (secretary) — poor Warren Buffet's secretary, God help her, God bless her. And yet this President, after demagoguing this issue for a year and a half, pays an 18 percent tax rate, which, by the way, is half of the tax rate that I pay."
Apparently, Scarborough has no understanding of the difference between a marginal tax rate and an overall effective tax rate. Obama's marginal rate, at $609,000 of income, was 35%. His effective rate was a little over 18%. When Warren Buffet referred to his rate being less than his secretary's, and Obama repeated him, the reference was to Buffet's marginal rate, because his income was almost entirely dividends and capital gain, then taxed at a top rate of 15%. The same could be said of Mitt Romney's income. This doesn't apply to Obama. His income in 2012 was all ordinary income.
Was Obama's effective rate lower than that of Buffet's secretary or a teacher, as Scarborough suggests? Absolutely not. Even if you assume Warren Buffet's secretary and her husband had income of $100,000, their effective rate would not be more than 10% or so, and that's assuming they take no deductions. Even a couple with an income of $200,000 and modest deductions for state income tax, mortgage interest and charitable contributions will pay less than 18% of their income to the IRS.
And besides, Obama's campaign position was that he himself should pay more in tax. So, if Scarborough's claims are correct, Obama is anything but a hypocrite.
Lastly, what about Joe's outrage that Obama's rate is "half of the tax rate that I pay?" Well, that can't be. The maximum marginal rate in 2012 was 35%. Can you have an effective rate that high? You can get close, if you make millions in income, but the lower rates on your first $380,000 of income will prevent your rate from reaching 35% overall. But that's quibbling, because 35% is close to double 18%. Scarborough, however, could not have been that close to 35%, because he paid significant tax to New York, the source of his Morning Joe compensation, which would reduce his effective federal tax rate. And he undoubtedly gave substantial amounts to charity, which would reduce his effective rate further.
So, Scarborough's effective rate likely was in the low 30's, unless he gave as large a percentage of his income to charity as Obama did, in which case his effective rate would be about 25%.
And why would Scarborough's effective rate be higher than Obama's? Because his income was higher. A lot higher. And that's the way progressive taxation works. The higher your income, the higher your overall income tax rate. Welcome to America, Joe.