At last week’s Republican presidential debate, I was struck by the repeated mention of the Tax Foundation and how it had found that all their highly regressive tax plans were totally great: they would balance the budget, give jobs to everyone, and gift ponies to all good boys and girls. And it is no surprise. Although it has a similar sounding name to the Tax Policy Center, the Tax Foundation is a Koch Industries backed grouped. Back in 2008, Paul Krugman wrote, The Tax Foundation Is Not a Reliable Source. (Of course, sleazy Greg Mankiw is for it, so that’s about all you need to know.) But here’s the kicker: even the Tax Foundation wasn’t that sanguine on the Republican plans — at least in terms of how regressive they were.
This is indicative of a major problem in American politics and the way that the media cover it. It would never fly for a politician to say, I ran the tax plan by my brother-in-law George (he took an accounting course in high school), and he thinks this plan will be dynamite. But you give George a million bucks and the title of President of the Tax Institute for Very Serious Accountability, and suddenly George’s opinions are golden. There’s no way that a journalist could ever distinguish between George’s Tax Institute for Very Serious Accountability and the Tax Policy Center. And the politicians will just say, “They have their experts and we have ours.”
Now you would think that after all these years, the voters would wake up. Last year I wrote an article I’m rather proud of, Reagan’s Legacy: Tax Cuts for Rich, Tax Hikes for the Rest. People think of Reagan and all the Republicans as lowering their taxes. This is no doubt due to the fact that this is the narrative that the media pushes. But the history of the last 40 years has been one where progressive taxes like the federal income tax has gone down, and regressive taxes like sales and usage, and payroll taxes have gone up. Net result: the lower and middle classes pay more in taxes and the rich pay less.
What continues to amaze me is the laser focus on the federal income tax. I understand the argument. Conservatives claim that everyone should pay the same percentage in taxes. Of course, they aren’t concerned about that when it comes to capital gains taxes. Marco Rubio wants to get rid of that all together. He would argue that there is a social purpose for that: it will help create jobs. But there is an even better argument for cutting the taxes of the poor: it will create jobs. But usually the conversation doesn’t get even that far. The media just allow Republicans to make these claims without putting it in context. The situation is even worse with the payroll taxes, of course.
You need to think about it in terms of opportunity costs. Imagine that the government wanted to spend $100 billion. It could do so by cutting taxes on the rich or giving benefits to the poor. In an economy that is not at full employment (which is pretty much all the time — and certainly now), much if not most of the $100 billion in tax cuts would sit unused. All of the money given to the poor would be used, thus stimulate the economy. This means that the conversation can’t be about whether tax cuts help the economy but rather if they help the economy more than alternative uses. It’s like the difference between using money to fight a war or to build infrastructure.
But we can’t talk about any of this because our media is postmodern. According to them, there is no truth — just opinions. So if Marco Rubio says that his tax plan is totally awesome, who’s to say it isn’t? And when even a right wing outfit like the Tax Foundation is skeptical, you know it has to be bad. But don’t worry! George’s Tax Institute for Very Serious Accountability will back him up.