Hey, everyone! This would be one of the math-intensive posts that I will be sharing so bear with me!
(Taken from https://www.instagram.com/berniesanders/)
This graph showing the disparity in after-tax income savings due to a new policy change in the US. The difference between the household earnings of <$10k and >$1 million is quite significant, differing by a factor of ~2115 times! However, as I would explain, this bar chart has some issues. For one, the x-axis is in a range and is unevenly distributed. Furthermore, it disregards the fact that tax savings are a function of income. Hence, a more appropriate chart would be as shown below.
Adjustments I have made:
1. I have adjusted for the range by taking a simple average of the 2 extremes. Since there is an unlimited upside for household income >$1 million, I have estimated the average to be at $2 million.
2. I have divided the tax savings by estimated income for each segment to get an estimated percentage.
Hence, the difference of factor 2115 has been reduced to a factor of 4. As can be seen here, there is still a significant difference between the high and low-income groups in terms of household income savings. However, this can be attributed to the large number of tax deductions the poor would receive vis-a-vis the rich. The lower base of taxable income for the poor will push up the tax savings as a percentage of taxable income for the poor while for the rich, the taxable income would be about the same as household income and so, the percentage would remain flat.
In conclusion, how charts are presented can sometimes lead people to think one way instead of the other and so, we must consider carefully the axis of the chart, what the trend says about the 2 variables, as well as any sharp points of inflexions that may mean something. This would enable us to view charts more accurately and avoid being misled.