Stan Collender has a characteristically perceptive discussion of the ongoing budget farce, and invokes Casablanca: “round up the usual suspects.” That struck me as the perfect motto for what I’m seeing, although I’m focusing on somewhat different aspects of the farce.
You see, until a few days ago the Trump sales pitch was a bit different from past GOP arguments for tax cuts, involving (a) a novel invocation of the supposed benefits of massive capital inflows from corporate tax cuts, and (b) outright lies on an unprecedented scale.
But what I’ve been seeing lately is a revival of some more traditional, Bush-era fraudulence. Two items in particular. First, the claim that the rich pay practically all the taxes, so that of course they have to get the bulk of the tax cut. Second, claims of vast growth, because Reagan.
On the first: you might think there was some contradiction between the incessant claim that this is a middle-class tax cut and the claim that the rich deserve to get the lion’s share. But doublethink is central to the whole enterprise.
Anyway, the claim about who pays taxes is a very familiar one to us old hands: say “taxes” when what you really mean are “federal income taxes,” as if this was the only tax.
In reality, while the federal income tax is indeed mainly paid by people with high incomes, it’s far from being the only tax. At the federal level, most people pay more in payroll taxes than in income taxes, and the payroll tax is actually regressive. And state and local taxes are also a big deal, and they’re definitely regressive. Efforts to estimate the overall distribution of taxes find that the system isn’t especially progressive: the wealthy pay a lot in taxes, but they also receive a lot of income, and the shares aren’t much out of line:
Meanwhile, about Reagan: yes, he cut taxes, and presided over average growth of more than 3 percent. But you know who else presided over growth of >3%?
Clinton you probably saw coming — and Clinton, of course, raised taxes yet presided over a boom that surpassed Reagan’s. Carter may be a surprise: what few realize is that overall performance under Carter was pretty good, but his timing was off: fast growth in the early years, a recession (and inflation) at the end.
In any case, holding up either Reagan or Clinton as a model, a reason to believe 3% growth is in easy reach, misses one huge factor: demography. Under Reagan the last of the baby boomers were just entering their prime working years; these days we’re on our way out the door. Jason Furman had a nice graph to illustrate just how much has changed:
So anyone invoking Reagan-era growth to justify outlandish projections now is ignorant, dishonest, or both.
Actually, of course, I shouldn’t be surprised to see some of the good old bogus arguments make a reappearance alongside the new set of lies. My experience over the years has been that the right never gives up an argument, even if it’s in flat contradiction to some other argument they’re making. They throw everything they have at the wall, in the hope that some of it sticks. And so it is with the tax “debate.”
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