A false generalization occurs when a small sample or an individual sample is thought to represent all examples of the same type. If one energy company (Enron) is found to be corrupt, it is a false to conclude that all energy companies are corrupt. False generalizations are primary mistakes in critical thinking. All students in Business Ethics should be taught to avoid them.
Warren Buffett has complained on numerous occasions that the tax rates for the wealthy are not fair. Here is an account of one such incident, as reported by The Times, on June 28, 2007:
Speaking at a $4,600-a-seat fundraiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (£26 billion), said: “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.
This may be an accurate account of his individual circumstances, but it is a gross misrepresentation of reality. Buffett’s salary is $100,000 per year. It is reasonable to assume that his effective tax rate on this part of his income is near the median, approximately 25%. The rest of his income is from the sale of stocks, much of which may be taxed at a rate as low as 15%. The weighted average to salary tax and tax on other income makes his personal effective tax rate between and 17% and 18%.
As for his secretary’s rate, it is impossible under current law that anyone earning $60,000 per year is taxed at an effective rate of 30 per cent. If she is taxed near the average rates for similar incomes the effective rate of her taxes is 17-18%, essentially the same rate as her employer.
Buffett’s case does not demonstrate anything about the overall effective rates of top income earners in the United States. In fact, the top 1% have always been taxed at the highest effective rates. Since 1980, there has never been a year when the top 1% paid lower rates than any other group. Students can check this by researching CBO data.
Buffett’s kind of disinformation based on false generalization inclines us to make judgments and form opinions that have no basis in reality. These are the kinds of errors Business Ethics students should be on the look out for as they develop a critical stance toward the media.
Warren Buffett has complained on numerous occasions that the tax rates for the wealthy are not fair. Here is an account of one such incident, as reported by The Times, on June 28, 2007:
Speaking at a $4,600-a-seat fundraiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (£26 billion), said: “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.
This may be an accurate account of his individual circumstances, but it is a gross misrepresentation of reality. Buffett’s salary is $100,000 per year. It is reasonable to assume that his effective tax rate on this part of his income is near the median, approximately 25%. The rest of his income is from the sale of stocks, much of which may be taxed at a rate as low as 15%. The weighted average to salary tax and tax on other income makes his personal effective tax rate between and 17% and 18%.
As for his secretary’s rate, it is impossible under current law that anyone earning $60,000 per year is taxed at an effective rate of 30 per cent. If she is taxed near the average rates for similar incomes the effective rate of her taxes is 17-18%, essentially the same rate as her employer.
Buffett’s case does not demonstrate anything about the overall effective rates of top income earners in the United States. In fact, the top 1% have always been taxed at the highest effective rates. Since 1980, there has never been a year when the top 1% paid lower rates than any other group. Students can check this by researching CBO data.
Buffett’s kind of disinformation based on false generalization inclines us to make judgments and form opinions that have no basis in reality. These are the kinds of errors Business Ethics students should be on the look out for as they develop a critical stance toward the media.
