Biden Administration Economists Offer Up Economic Fiction

By at 28 September, 2021, 9:32 am

Making things up, like redefining income to fit one’s political preferences, is not legitimate economic analysis.

by Raymond J. Keating –

Officials within the Biden administration – including various economists – are having a tough time dealing with economic facts. Indeed, they have gone so far as to mislead and serve up economic fictions.

In August 2021, SBE Council took the administration to task (“Biden-omics Fantasy: Increasing Taxes on Business is Good for Small Business”) for grossly misleading claims regarding the impact of proposed Biden tax increases, namely, ignoring and downplaying the negative impact on small businesses.

While the Biden administration was peddling the idea that small businesses would basically go untouched by such tax increases – even benefit from them somehow – we found:

So, based on these numbers, at least 2.1 million small businesses would be facing higher taxes, directly, under the Biden plan. By the way, when considering that there are only 20,000 large business (with 500 or more employees) in the U.S., that means the ratio of small to large businesses being directly impacted by the Biden tax increases would be 105 to 1.

And that only covered part of the Biden tax increase, with other portions, such as a higher capital gains tax, also affecting entrepreneurship and small business in negative ways.

Unfortunately, the Biden folks are at it again.

Redefining “Income”

In an analysis by Greg Leiserson, senior economist at the Council of Economic Advisers (CEA), and Danny Yagan, chief economist at the Office of Management and Budget (OMB), released by the White House on September 23, it was asserted that the 400 wealthiest families in the U.S. paid an average federal income tax rate of 8.2 percent over the period of 2010 to 2018.

In a nation of nearly 333 million people, it’s not clear what the value of such an analysis is (other than politics), but there’s an even more troubling aspect of this study. That is, the authors chose to redefine “income,” and therefore further feeding the political purpose of fueling envy and class warfare sentiments in an effort to push the president’s tax increases forward.

The authors plainly state:

“We estimate the average Federal individual income tax rate paid by America’s 400 wealthiest families, using a relatively comprehensive measure of their income that includes income from unsold stock.”

That’s much more than a “relatively comprehensive measure of their income.” It’s counting something as income that simply is not income. This analysis chooses to create income out of no income.

It’s misleading and dishonest, and done for political purposes.

Proposed tax changes – for better or for worse – should be rigorously debated. Within that debate, there will be robust and fundamental disagreements about many particulars, often reflecting very different views on how taxes affect decisions, incentives and the economy.

However, this debate and discussion should not include pure fictions dressed as economics. Making things up, like redefining income to fit one’s political preferences, is not legitimate economic analysis.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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