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Jan 26

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Kim Kardashian could teach the Courage Campaign to be more revealing

The Courage Campaign has made Kim Kardashian and her wealth the face of California’s high income earners.  One of the group’s aims is to “Ask Kim to support the Millionaire’s Tax of 2012.”  Until she does so, the campaign is highly critical of how much Ms. Kardashian and other high income earners pay in California state taxes.  The Millionaire’s Tax proposes to increase the tax rate on those making over $1 million per year by three percentage points and those making over $2 million per year by five percentage points.

The group prepared a web video that shows Ms. Kardashian declaring, “Being on TV has changed my life because I get lots of free stuff” followed by images of Ms. Kardashian reveling in her wildly extravagant lifestyle.  The point of the video is to provoke a sense of unfairness because of the difference between what Ms. Kardashian pays in taxes and what the “average middle-class Californian” pays in taxes.  The video concludes, “Don’t you think she could pay a little more?”

The video is effective (and reportedly has “gone viral”) because it targets a celebrity who generates tons of money.  A wikipedia page about Ms. Kardashian describes her as “an American socialite, television personality, model, actress, and businesswoman.”  She stars on the reality television show Keeping Up with the Kardashians.

Financial analysts, such as yours truly, are unlikely candidates to rush to Ms. Kardashian’s defense and with the same vigor and passion that we take to debates of the  market efficiency hypothesis.  But the Courage Campaign’s tactic is over the top and, ironically, not because it exposes Ms. Kardashian, but because it exposes too little.  In particular, a caption on the campaign’s website declares:

Kim Kardashian made more than $12 million in 2010, but she only paid 1% more in taxes than a middle-class Californian.”

Analysts are right to be annoyed at this claim.  This statement is not simply misleading, but blatantly false.  Furthermore, the falsehood goes beyond simply overlooking (intended or not) the “percent” versus “percentage point” distinction as discussed here, although, yes, it does that too.

The most forgiving re-writing of the Courage Campaign’s statement, while remaining factual, might read:

Kim Kardashian made more than $12 million in 2010, but she only paid a marginal state tax rate that is one percentage point higher than that of a middle-class Californian.”

Brett Arends, a writer for Market Watch, performed several calculations that compare Ms. Kardashians taxes with that of the so-called “middle-class Californian.”  Drawing upon Mr. Arends’ estimates, the Courage Campaign’s declaration might be corrected to say:

Kim Kardashian made more than $12 million in 2010, but she only paid $1.2 million more in state taxes than a middle-class Californian, who paid $2,200 in state taxes.”

Or:

Kim Kardashian made more than $12 million in 2010, but she only paid 55,709% more in state taxes than a middle-class Californian.”

That’s right, she does not pay “1% more in taxes than a middle-class Californian” as the Courage Campaign claims, but 55,709% more than “a middle class Californian” (calculated as 100x(1,230,000-2,200)/2,200).  Further still, the Courage Campaign could truly expose Ms. Kardashian’s taxes with a picture that compares what she pays and what “a middle-class Californian” pays.  It would look like this:

Kim Kardashian’s career thrives on exposure.  The Courage Campaign’s “1% more in taxes” claim withers on exposure.  The Courage Campaign’s success to date has occurred because the campaign has covered up the important details.  A closer look at Ms. Kardashian’s taxes exposes the Courage Campaign and, I suspect, leaves them feeling a bit red in the face.

About the author

Eric Madsen

Mr. Madsen is a Chartered Financial Analyst (CFA) charterholder and a Manager at Fulcrum Inquiry, a finance and economics consulting firm that performs economic damages analysis involving commercial litigation, financial investigations, business valuations, and forensic accounting. He also holds an MBA from the UCLA Anderson School of Management and a B.S. in Economics. He conducts expert analysis in finance and economics. Mr. Madsen may be contacted at 213.787.4122 or at emadsen@fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2012/01/kim-kardashian-could-teach-the-courage-campaign-to-be-more-revealing/

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