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Tuesday, October 16, 2012

Exploding Republican myths on taxes, more

Posted By on Tue, Oct 16, 2012 at 9:18 AM

If facts mattered, Ernie Dumas' column this week would put the Republican myth machine to flight.

Arkansas Blog and Arkansas Times readers, at least, will be fully informed.

Taxes are going up? No. The combined tax rate is at its lowest point in 62 years.

Arkansas is a high-tax state? No, on a per capita basis it's low.

Democrats are always responsible for tax increases. No. See Mike Huckabee's huge tax increases.

The growth rate in federal spending is out of control. No, it's been much lower under Obama than under Reagan, Bush or Clinton.

Democrats run chronic budget deficits. No, they've more often balanced budgets than Republicans.

The corporate tax rate is too high. No. The effective corporate tax rate is actually not burdensome at all by comparison with others.

Read on for details if facts matter. If they don't, you'll be cheering Romney tonight.


Old Myths and New Realities

The greatest advantage that Republicans enjoy in races from JP to president—well, after the advantage of superior money—is that they won the battle for conventional wisdom.

For three decades, Republicans have just been better at mythmaking than Democrats, and they keep perfecting it. It began in the Reagan era, although Reagan was not always the originator and reality sometimes dawned on him, as it did when he learned quickly that huge tax cuts for the well to do and corporations would enlarge, not close, budget deficits and would not create the economic boom that Arthur Laffer had predicted.

Who can identify all the reasons that Republicans as a class prove to be better at selling fiction over fact than are Democrats, who individually try from time to time and fail? Republicans everywhere tend to read from the same playbook, which helps. Those who stray, even obliquely, as have a few Republican lawmakers in Arkansas and elsewhere, pay a price in their own primaries. Democrats, from Little Rock to Washington, cannot agree on an ideology or even on what they are proud of, although Joe Biden made a good stab at it in the vice presidential debate. He was clobbered for it.

So Republican bankrollers like the billionaire Koch brothers are selling Arkansans on the idea that Democrats have taxed the state and its people out of competition with all the low-tax states around them and that people are fleeing the state in droves to low-tax havens. We’ve pointed out that the reverse is true. Arkansas is a low-tax state, although it spreads the tax burden perversely on the poorest people. All the tax hikes of the past 15 years—all but a very small one on gas producers—were a Republican governor’s doing, and Republicans if they gain power expect to shift the tax burden even more unevenly on the poorest and the not so rich.

The mythmaking, however, is largely aimed at the national government, and Democratic candidates for low-lying offices are associated with Washington evils and the black president who fashioned them. Republicans in some parts of the state accumulate Obama yard signs and stick them alongside the signs of Democratic candidates for local offices.

So here are a few of the big myths that are shaping elections down to
the precinct:

Taxes just keep going up, and Democrats are responsible.

Reality: Federal tax rates have been going down, not up, pretty steadily for 60 years, except for a couple of blips for higher-income people in 1990 and 1993 in the case of the income tax and for the higher payroll taxes ordered under Reagan and small excise tax increases under Reagan and Clinton. Middle-income Americans now pay federal income taxes at the lowest levels since before World War II, thanks partly to tax cuts by President Obama and the Democratic Congress in 2009. It is true that state and local taxes during those 60 years, in Arkansas and elsewhere, have tended to rise, but even at that all taxes combined—federal, state and local—consumed 9.2 percent of all personal income in 2009, the lowest rate since 1950, according to the U. S. Bureau of Economic Analysis, and the percentage is declining.

Far more than any of his predecessors, the socialist Barack Obama has sent federal spending out of control.

Reality: Federal spending in Obama’s first term, including the fiscal year that began two weeks ago, is growing at the smallest pace in more than 40 years—1.4 percent a year. It would be even smaller were it not for the one-time $551 billion of stimulus spending ($3.5 billion of it in Arkansas for highways, medical care and other projects) that stopped the economic slide of 2007-09.

Here are the equivalent percentages in spending growth of his predecessors: Reagan’s first term, 8.7 percent; Reagan’s second term, 4.9 percent; George Bush I’s term, 5.4 percent; Clinton’s first term, 3.2 percent; Clinton’s second term, 3.9 percent; George Bush II’s first term, 7.3 percent; Bush’s second term, 8.1 percent.

Democrats bankrupt the country through deficit spending.

Reality: The federal budget has been balanced 12 times since World War II—three times, barely, under President Eisenhower, the other nine under Democrats. Obama inherited a $1.4 trillion deficit from Bush, though
$114 billion of that should be reassigned to Obama because that much of his stimulus was spent in the tag end of Bush’s last fiscal year. The deficit has declined, though gradually, since then.

Corporate taxes are so high in the United States that we can’t compete with other countries and they are costing jobs.

Reality: The nominal top tax rate, 35 percent, is relatively high but the effective tax rate paid by U.S. corporations is less than half that and many of the most profitable companies pay no income taxes. U.S. corporations bear a smaller total tax burden than businesses in Western Europe and most other industrialized countries. In Arkansas, unlike many competitor states such as Texas, big multistate corporations escape most of their taxes by assigning Arkansas profits to subsidiaries registered in tax havens like Delaware.

But facts are for statisticians. They bore the voter and have no place in modern politics.

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