Working Up

by Dwayne Phillips

This may be a waste of time, but I review how to calculate the percent change.

I feel silly about this post. I am going to show how to calculate the percent change in numbers. I learned this when I was 12 or 10 or something in school math. A look at the recent media discussions of the fiscal cliff and such reveal that many people don’t know how to perform this calculation. So here goes:

Percent Change = (New Value – Old Value)/(Old Value)

Not very complicated, right? Let’s take a real-world example.

The Payroll Tax, formerly known as the Social Security tax, will increase from 4.2% of salary to 6.2%. Most media outlets proclaim this to be a 2% increase. Gosh, how wrong! Let’s go back to the formula and walk through this.

If you made $100, you paid 420 cents in taxes. Under the change, you will pay 620 cents in taxes:

Percent Change = (620 – 420)/420

Percent Change = 200/420

Percent Change = 0.48

Percent Change = 48%

WHAT? Payroll taxes are rising 48% !?!?!?!??!? They told me they were rising 2%! What gives?

Perhaps the media:

1. is buddies with those who are raising the tax and doesn’t want them to look bad
2. doesn’t know anything about math and the definition of percent change

There is probably something of both 1 and 2 in the story, but more likely 2 is the dominant factor. Have you ever discussed “higher math” with a person having a journalism degree?