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Taxes and data visualization

Nadia Hassan writes:

Vox has a graph of tax rates over time.

Their visualizations do convey that tax rates for high earners have declined over time and tax brackets are fewer now, but it seems like there are more appealing and intuitive ways to display that.

I agree. This visualization reminds me a lot of the data visualizations that Antony Unwin criticized in our paper from a few years ago: a lot of effort seems to have gone into making an attractive display (in this case a dynamic visualization) particularly appropriate for this particular configuration of data, without a clear sense of how the graph helps address the questions that might be asked of those data, in this case trends in differential tax rates.

P.S. More here.

16 Comments

  1. Dale Lehman says:

    I don’t find this to be a very effective display. While animation can be nice, it often is distracting and renders the display of information less clear. Filtering is far more useful in an interactive display. This one just shows income levels jumping around – it makes a clear point about more or less complexity of various tax structures, but if the point is about the relative tax brackets for different income levels, then I think a number of static displays would be far more effective for making those points.

    • Dzhaughn says:

      One of the horrible things about this and similar things is that it is difficult to reference part of the presentation. I can’t even cut and paste the text. Maybe that’s a feature not a bug.

      The text is also not indexed by Google.

  2. Curiousguy says:

    “our paper from a few years ago”

    Link?

  3. Taxes have the worst combination of rent seeking and innumeracy that you will find anywhere. It’s shocking.

  4. Dave says:

    My biggest problem with common visual representations of tax brackets is that they leave out how many people actually paid the top tax bracket. You’ll see in the history that the top marginal rate was in the 60s for incomes above $10M (and sometimes over $80M!), but not many people were actually paying those rates. Also omitted in these displays is that the top marginal rate was under 3% (and often 0%) for most of the country’s history, with 0 to 3 income brackets, which biases them toward those who want to claim that today’s rates or number of brackets are historically low (tariffs were mostly used in their place before the 1910s, although total federal taxation was relatively low compared with GDP… personally, I would favor a progressive consumption tax with no loopholes or exemptions to replace the income tax).

    This graph from wikipekia, actually summarizes the (recent) data pretty nicely, I think, showing highest rate, lowest rate, number of brackets and income threshold for the top bracket:
    https://en.wikipedia.org/wiki/Income_tax_in_the_United_States#/media/File:Historical_Marginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg

    Could be cleaned up a bit aesthetically, but it’s a nice summary that gives you all of the relevant information in the Vox visualization without requiring interaction.

  5. Jim says:

    How much income do tax rates matter for the ultra rich anyway? Many of today’s ultra-rich are rich because of incentive stock option gains, which have zero tax between the option price and fair market value; or historically much wealth has been obtained through capital gains, which have always been taxed well below the top income rate.

    People think inequality is rising because of low taxes on wealthy people? Really? No. :) That’s silly. Sorry.

    Inequality is rising because of the *weak demand for labor* both across the board but especially for less educated workers.

    The weak demand for labor results from a glut of workers, and that glut probably comes from:

    a) Women entering the Western work force since the 1960s (effectively doubling the size of the labor pool);
    b) The end of mandatory retirement (it irked me to see the wealthy 94 year old Andy Rooney soaking up a big salary);
    c) Globalization;
    d) Automation;
    e) exploding environmental regulations destroying resource production and hitting manufacturing as well;

    If you keep taking away jobs and adding people, the demand for labor will obviously shrink, meaning relative wages will decline as well.

    There’s the answer to your “inequality” problem.

    • Curious says:

      While I agree with many of your assertions about the supply of labor, except that I do not know enough about a realistic estimate of the effect of regulations to comment intelligently — I disagree that taxation is trivial.

      1. We tax less than 50% of total income from all sources.
      2012 adjusted gross income was $9.04 trillion.

      • Taxes on the ultra rich are trivial though. I’ll define ultra rich as 100x median income or more. So few people are involved that you could make that tax bracket anything and it would have just epsilon effect on the total.

      • Curious says:

        2. Total income from all sources was $13.9 trillion

        3. This leaves $4.5 trillion (54%) as a ratio of taxed income.

        If this income were taxed at 30%, it would provide a substantial amount of tax relief for the middle brackets which would increase demand for goods and services from those brackets which would in turn spur investment in businesses that provide those goods and services.

        • jim says:

          Perhaps, but the question is about equality / inequality, and “back in The Day” vs Today. Everyone seems to accept at face value that back in the day, everything was more equal. So, for comparative purposes, the absolute amount of taxation doesn’t tell us much, what we need to know is are we taxing less or more than “back in the day” and is that creating the purported inequality in modern society?

          I won’t bother to look up the numbers so I can’t offer firm conclusions. But I can say that today much income is taxed that used to go untaxed. Computers and data systems make all kinds of reporting possible that weren’t possible or reasonable 50 years ago. For example 40 years ago (that’s about right for “back in The Day”, huh?), waiters could easily scoot by without reporting a good share of tips. Not today. Rules on tips have tightened substantially and much tipping is on cards anyway so it has to be reported. And today if you sell anything as a side business you probably do it on eBay, which means PayPal reports your sales to the IRS.

          I’m sure there are other examples.

          • Curious says:

            I don’t disagree. Technology has both increased that which can be taxed and made it easier to avoid it for those with the resources to do so.

            My point was that the tax system may exacerbate the inequity by limiting demand and could be part of a solution. More money in the hands of wealthy people does not change demand and simply effects available money for investment of which there is currently no shortage. Money in the hands of people who do not currently have much discretionary spending has an immediate effect in demand for all kinds of goods and services.

            • jim says:

              “available money for investment of which there is currently no shortage”

              !!You can say that again!! That’s huge part of the problem: the stock market offers a better risk/return ratio than a business, so why invest in a business?

              I think there’s one kind of tax that could be *very* effective in driving money out of the market and back into generating real returns: a healthy tax on incentive stock options (say, providing an exception for the first $400K annually). Then the entire tech sector would actually have to create businesses that generate enough wealth to pay people in cash instead of funding money losing “growth” businesses (Amazon, Salesforce) by paying in options.

      • Curious says:

        Correction: That should be less than 70% = $9.04/$13.9.

      • jim says:

        If you want to see the effect of increasing env regs, all you have to do is look at unemployment rates in resource-dependent counties. Here in WA state, there are so few logging mills left that some logs are trucked several hundred miles to mills.

        Env regs are also a factor in driving manufacturing overseas because they increase the cost of operation, present a risk of large future remediation costs and, because of large conservation set-asides, drive land values higher.

        It’s hard to imagine a way that environmental regulation could increase employment or drive wages up, except for employment in the government / gov contracting sector, which is ultimately dependent on the private sector for funding.

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