Your $4,000 in Ten Years

So ... Kevin Hassett defines very few things in his paper named, 'The Growth Effect of Corporate Tax Reform and Implications for Wages'

And, frack, we can see this coming in the title. Oh, but let's stay on topic.

Dear Kevin says, in so many lines of sans serif, IF we cut corporate taxes then wages will rise by $4,000!

If we use the average'value of household income as reported by the Census. The 'if' means nothing in that context. We need to define the following:

Wages
Average value
Household income
As reported by the Census

Those definitions matter in the larger discussion. Taken together, in the least way, Hassett's magic numbers depend upon average income as being $83,143. If any other number for income is used, wages won't rise by $4,000 in 10 years.

Can't.

Let's throw macro and micro economics up in the air. Which ever one lands ... Yeah, you have to know some deep economic stuff to understand that comment.

So Hassett uses Census information. That's good stuff, right? The best on the Planet. But ....

The Census 'average value' could be the median income figure. Or, not. It could be the mean or average. Or, not. Hassett doesn't say.

But, Census household income does not include all types of income, notably lump sum payments, income from annuities, and .... capital gains.

I'll have to come back to Capital Gains when that brain cell recovers. I only have two left.

So, if we use this vague 'average value' from the Census's measure of household income, does it mean average. No. Using that number, which excludes income from annuities and capital gains, skews the 'average lower.' And, we don't want average to get any higher for Hassett's conclusion.

If his average income of $83,143 gets much higher, 2 out of 3 households will not be average. As it is, 64% of households earn less than his average. But, I want to be average like everyone else!

Funny things come from definitions. Average. Mean. Median. Income. Brain cell damage.

So Hassett should have used median income as reported by the Census. In Georgia, that's only $50,853, some 30 thousand dollars less.

But, wait. Why not use median family income instead of median household? Because family income is always higher than household income under Census rules. In Hall County Georgia, family income is $58,295.

Are you confused yet?

So, does the household in Georgia, making only $50k get the $4k Hassett proposes?

You're not confused about that, are you? The answer is not no. It's Hell No!

So, if Hassett had used BEA definitions [See author's bizarre comment on macro and micro economics]of income , reported by family, his $82k number exceeds $100k. If it exceeds $100k, and includes Capital Gains, where does his figure of $4k in new wages land?

We don't know because Hassett doesn't define wages. Think Stock Options! Most economic definitions of 'wages' include lump sum payments like stock options.

So if we don't know average versus mean, household versus family, income versus income, and wages versus Capital Gains/Lump Sum Distributions/Annuities/Stock Options ...

What can we conclude?

If you're reading this, in 10 years, under the Republican Tax Reform, I'm betting that your after tax paycheck will buy less than it does now.

I'm taking both brain cells and leaving this rant here.