Tax Policy

Greg Anrig says conservatives have essentially abandoned their pursuit of private-school vouchers. Good article overall, but an inaccurate account of what happened in Utah last year:

In 2000, both California and Michigan offered referendums on voucher programs for all children in the state. The initiatives were defeated by margins of forty-two and thirty-eight points, respectively. Voucher supporters like to blame the defeats on well-funded teachers unions, but the law professors James E. Ryan and Michael Heise found that voucher supporters had outspent the opposition in Michigan, and both sides had spent about the same amount of money in California. They concluded that the decisive resistance to vouchers had come from suburban voters who feared that the programs would take money away from local schools and worried about the arrival of lower-income and minority students in their children's classrooms. And last year, in the conservative, predominantly white state of Utah, the Republican legislature put a November referendum for a voucher program on the state ballot, which Overstock.com CEO Patrick Byrne and his family supported with about $4 million. It lost by 62 percent to 38 percent — the eighth decisive loss for a statewide voucher ballot initiative. There have not been any victories.

Ezra Klein:

The tendency [of Democrats] to speak of taxes as an unpleasant surcharge exacted for the government and spent on...well...who knows, is poisonous. Within that mindset, folks probably prefer if you take the cash from the rich and not from them. But if Obama is going to be the transformational, Reagan-style pol he presents himself as, he's going to have to grow comfortable speaking positively of the role of government, and selling some of his initiatives as good ideas worth paying for.

It's worth it to have effective responses to natural disasters, worth it to have a modern national infrastructure, worth it to have national health care, worth it to have more than one safety inspector examining Chinese goods, worth it to invest in medical and scientific research, worth it to enact universal pre-kindergarten.

Indeed, many of these priorities are not only worth the cost, but they're actually good investments. They're a damn good deal. And Democrats need to grow comfortable [with] making that case.

Ezra Klein:

Progressives have been so thoroughly bludgeoned on taxes that they've lost all appetite for engaging the issue. The Democrats running for president (with the exception of Mike Gravel who is, embarrassingly, a FairTax advocate) all have tax plans, but none do much beyond simplifying the filing system and offering the middle class some "tax relief." Both are potentially worthy goals, but they approach the discussion on firmly conservative terms: Taxes are too high, and they are too complicated. [...]

Cornell economist Robert Frank has a particularly elegant proposal for a progressive sales tax that's tabulated at year's end, rather than at the point of sale. Under his system, come tax time, families would report their income, just as they do now, but also their savings (how much they've invested, kept in the bank, etc). The difference between the two would be their taxable consumption. Everyone would then get a standard deduction of $30,000, effectively exempting low-income families from taxation altogether. As the total taxable consumption rose, so too would the rates, just as is true now. A taxable consumption of $15,000 might pay 10 percent in taxes. At $8 million the top rate could be as high as we chose to make it. [...]

A more confident progressive leader could try to generate some momentum on the issue on his or her own terms. They could, as Al Gore has suggested, implement a carbon tax, using the tax code to clean up the environment. They could, as Robert Frank has suggested, use the tax code to encourage savings and investment and take a stand against the conspicuous consumption arms race currently being carried out in the top slivers of the income distribution. They could do any of a number of things and force the Republicans to argue against those goals and values.

Salt Lake Tribune:

Utah's Legislature enters the session flush with cash, but with economic storm clouds on the horizon. Lawmakers expect to have more than $1 billion in surplus to juggle, and Utahns, by a large margin, support investing that money in schools.

Forty-nine percent say school spending is the highest priority; 26 percent say a tax cut tops the list. [...]

Lawmakers in the past two sessions have taken bites out of the sales tax on food. Now, the poll shows, Utahns want another helping.

Forty-four percent of residents said that, if there is a tax cut, it should be on food. Three in 10 wanted to see property tax relief and 19 percent want an income tax cut.

"I really would like to see the tax taken off food," said Lin Jatubczak, a 72-year-old retiree from St. George. "I think that would benefit a lot of people who really need help."

Editorial in the Washington Post:

"I know that reducing taxes produces more revenues," Republican presidential candidate Rudolph Giuliani declares in a new television ad launched Thursday. "Democrats don't know that. They don't believe it."

There's a good reason for that: It's not true. [...]

You don't have to turn to Democrats to refute this point; just read the studies and comments by Republican economists, including many from the Bush administration. President Bush's Treasury Department, analyzing the "dynamic" effects of making the Bush tax cuts permanent, found that even under favorable assumptions, the positive economic impact would make up for no more than 10 percent of the tax cuts' cost. [...]

Mr. Giuliani isn't the only believer in the tax fairy; numerous Republicans, including the president, have made similarly fanciful claims. But if he were to find himself in the White House and hoping to find that extra revenue he is convinced tax cuts produce, Mr. Giuliani would discover only disappointment under the presidential pillow.

TIME:

If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money. "You cut taxes, and the tax revenues increase," President Bush said in a speech last year. Keeping taxes low, Vice President Dick Cheney explained in a recent interview, "does produce more revenue for the Federal Government." Presidential candidate John McCain declared in March that "tax cuts ... as we all know, increase revenues." His rival Rudy Giuliani couldn't agree more. "I know that reducing taxes produces more revenues," he intones in a new TV ad.

If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves — and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues.

Letter in Friday's Salt Lake Tribune about Patrick Byrne, CEO of Overstock.com and financier of the pro-voucher forces in Utah:

Being a financial analyst and an MBA grad, I will try to use my low Utah IQ to figure things out. Overstock.com, Mr. Byrne's company, has been in business since 1997 and to this date has yet to earn a profit. [...]

I may have a low Utah IQ, but I do know one thing: Mr. Byrne obviously has no idea about how to run a successful business. Why would anyone think he has a clue about how to spend my tax dollars? Frankly, I am glad his opinion on school vouchers differs from mine. I would be worried if I actually agreed with the guy.

Ryan Judkins
Salt Lake City

But don't blame Byrne for his company's $100-million loss in 2006 — blame the Sith Lord. (Is Patrick Byrne related to "Super" Dell?)

Guest poster Neil at Ezra Klein's blog:

Another big difference between the 1950s and today is that top marginal tax rates have fallen dramatically. From 1951 until 1963, the top marginal tax rate was above 90%. Now it's 35%. So if you were trying to accumulate wealth in the 1950s, it would've been sensible to look after the long-term health of your business and rely on a steady income, year after year, in the lower brackets.

Nowadays, you don't have to do that. You just have to juke up the stock price without tending to the fundamental health of the corporation you're running, earn an insane paycheck for a short period of time, and the low marginal tax rates will allow you to keep two-thirds of the money you make. So CEO pay runs to 800+ times the minimum wage rather than the mere 50 multiple that prevailed in 1965, and the people at the top are ready to take the money and run.

And it is dead wrong, because the vast majority of Americans will not be subject to the GOP's so-called "death tax" when they die. From CNN Money:

Warren Buffett thinks those who use the phrase "death tax" are intellectually dishonest because the phrase in his words is "clever, Orwellian and dead wrong."

The billionaire investor has been an outspoken critic of efforts to repeal the estate tax and in testimony at a Senate Finance Committee estate tax hearing on Wednesday, he told lawmakers that you'd have to attend 200 funerals to be at one where the family of the deceased would owe estate tax.

Buffett said if anything the estate tax is a "death present" because heirs figure their capital gains on inherited assets based on the price when they inherited them rather than when the decedent bought them. [...]

"I believe in keeping equality of opportunity," said Buffett. "You don't get to be a quarterback ... because your father was a quarterback 20 years ago."