More Lies about Tax Lies

More Lies about Tax Lies

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Professor James Maule has, once again, lied about who tells tax lies. He lists five myths – he really means lies – which he says the right tells about taxes. In this post I will discuss and hopefully refute the first three of them.

Maule’s First Myth

The first myth, that “47% of Americans do not pay taxes” is a fairly new one, advanced to support the proposition that the poor should fork over more of their income and assets because the wealthy are over-taxed. The flaw in the statement is that it would be accurate if the adjectival phrase “federal income” were inserted before the word “taxes.” By leaving out those important words, the authors of the statement convey a meaning that is not supported by the facts.

My Response

No serious person on the right has ever suggested that the poor should pay more taxes because the wealthy are over-taxed. That is a left wing lie and Maule knows it. Conservatives want everyone to pay less taxes. Maule knows that, too.

The truth is, and I suspect Maule knows this as well, that conservatives cite the 47% statistic to defuse an actual lie repeatedly told by the left: That the rich don’t pay their fair share of income taxes.

The obvious point is - for anyone who is not blinded by ideology, that is – that if the top 50% pays 100% of the federal income taxes, the assertion that the top 50% does not pay its fair share is false.

And, of course, Maule knows that we are and always have been talking about federal income taxes. After all, it was the left that began the argument by framing it in terms of federal income taxes. Progressives like Maule said that the rich were not paying their fair share of taxes and because they weren’t we must increase their federal income taxes. Progressives didn’t say that the rich weren’t paying their fair share of sales taxes or excise taxes or state income taxes. Again, they said the rich weren’t paying their fair share of federal income taxes.

Maule knows very well that when conservatives say that 47% of Americans don’t pay taxes they mean they don’t pay federal income taxes. And by trying to get you to believe that conservatives are lying about who does and who does not pay taxes in America he is being the dishonest one.¹

So, conservatives have pointed out that 47% of Americans don’t pay taxes as a rejoinder to the left’s absurd claim that the rich are not paying their fair share of federal income taxes. Conservatives are countering with the obvious and simple argument – one that obviously disturbs the pro-tax, class warrior left – that proves that the rich are, in fact, paying more than their fair share of federal income taxes.

The reason Maule must label the truthful statement ”47% of Americans don’t pay federal income tax” a lie is because it doesn’t conform to his stereotypical and simplistic conviction that the rich get all the breaks and are sticking it to the poor. A conviction that he and those of his ilk must get the public to share in order to gain support for their plan to confiscate wealth from the haves and redistribute it to the have nots.

Sadly, rather than changing his beliefs to conform with the facts, Maule calls the facts a lie. And the only way he can call this particular fact a lie is to recast it from “47% of Americans don’t pay federal income tax” to “47% of Americans don’t pay any tax at all.” Nobody serious has ever made the latter argument and Maule knows it.

This, folks, is what dishonesty looks like.

Maule’s Second Myth

The second myth, that “The American people and corporations pay high taxes” is a bit more difficult to parse. What is meant by “high”? Compared to a one-percent tax rate, there is a plausible argument that most American people and corporations pay high taxes, because even 15 percent is “high” compared to one percent. On the other hand, if the statement is intended to make people think that Americans are taxed at a higher rate than are people and corporations in other countries, the statement is misleading. In 2009, every developed nation except two imposed taxes as a percentage of gross domestic product at rates higher than those applicable in the United States.

My Response

Whether or not Americans are overtaxed has nothing whatsoever to do with the tax rates in Japan, Germany, France, the UK or any other sovereign nation. Most Americans don’t want to be like France, even if Professor Maule does.²

What Maule won’t tell you, but should, if he were honest, is that he prefers the European socialist model to the American free market model and accordingly, instead of concluding that Europeans are overtaxed, concludes that Americans are undertaxed.

You be the judge of who is misleading whom.

And why do you suppose Maule clumsily combines ”the American people and corporations” instead of comparing, as tax scholars have done since 1913, corporate tax levels in America to corporate tax levels in other countries and individual tax levels in America to individual tax levels in other countries? The reason is apparent: By combining the two, Maule artfully avoids the thorny little fact that America has the highest corporate tax rate in the civilized world.

It may be subtle, but it’s still dishonest.

Maules Third Myth

The third myth, that “cutting taxes creates jobs and raises revenue” has been around for several decades. It makes for a great sound bite, but it’s factually erroneous. The lowest average annual growth in gross domestic product during the past 60 years has occurred when the top marginal rate is where it is today. The highest rate of growth occurred during years when the top income tax rate was in the high 70-percent range. The second highest rate of growth was when the top income tax rate was in the, indeed, 90-percent range, but that surely was attributable to the global war then being waged. The third highest rate of growth, within a whisker of second place, was when the top income tax rate was 39.6 percent, which is where it was before the Bush tax cuts went into effect. Those cuts drove the growth rate down to its lowest point. Surely the third myth is a pre-emptive strike against those who want to return to the rates as in effect before the Bush tax cuts, although opponents act as though people were advocating a return to the days of top rates in the 70-percent and 90-percent ranges.

My Response

Once again Maule does the dishonest conflation thing by attributing to all conservatives the argument that “cutting taxes creates jobs and raises revenue.” But Maule knows very well that many, if not most, conservatives don’t want to raise government revenues at all. They want to cut spending. And this is true even of those who believe that tax cuts create jobs. The reason Mr. Maule conflates these two separate and distinct arguments is because there is powerful and ample evidence that tax cuts do, in fact, create jobs and that no less a liberal personage than President Barack Obama has taken credit for it.

Now, let’s take the last sentence of Maule’s mythical third myth. Here, Maule is intentionally not telling you that the left’s hallowed economist, Paul Krugman, and many others (and I suspect even Maule, himself) believe that the top tax rates should be in the 70% to 90% range. The goal, remember, is wealth equalization. That’s why we hear all this class-warfare nonsense about income inequality.

Astute observers of the political scene know that whatever the top tax rate is as long as the rich have considerably more wealth than the poor and the middle-class Maule and those of his ilk will claim that the system is unfair and that the rich aren’t paying their fair share. It’s a slimey slope, indeed. First the rate goes to 39.6%, then it goes to 41.0%, then it goes to 45% and so on and so on until we get to Krugman’s optimal rate of 70%. The arguments the left makes now, when the top rate is 35%, will apply equally when the top tax rate is 50% or 60%, because it will always be true that rich people have more wealth than poor people and, therefore, can afford to pay more taxes.

Maule is also being dishonest when he cites statistics that show that economic growth was greater in periods of higher taxation than in periods of lower taxation. Surely he knows that correlation is not causation and that there are myriad other factors that play a part in the growth or contraction of an economy. But he hopes you aren’t smart enough to catch it or diligent enough to refute it.

Using Maule’s “correlation means causation” mode of argument, one could just as easily conclude that it was rampant government spending that stunted economic growth and not the Bush tax cuts. Of course, Maule would never make this connection because he favors increased government spending, so much so that he thinks we need to tax Americans more in order to fund that spending.

Maule, in his third mythical myth, provides a dishonestly simplistic explanation of extremely complex phenomena in the cynical hope that his readers will not research the matter further. Sadly, in that, he may be right.

Footnotes:

¹   I think it was Freud who said that what a man regularly criticizes in others is likely to be something he loathes about himself. It seems to come easily to Professor Maule to call other people liars. Perhaps I’ve demonstrated in this post that Maule’s propensity to challenge the honesty of others might very well be a classic case of psychological projection.

²  The propensity to point to other countries (some of whom have unemployment rates as high as 15%) as models for what America should do is a vile habit of the left. Maule does it here with great aplomb. Liberals simply do not have a high regard for America and Americans. Whatever we do is wrong. Whatever other countries do is right, despite the fact that many of these countries’ ships of state could not sink any faster if they were captained by Francesco Schettino

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About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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Comments

  1. How can you not address the biggest flaws of all in Maule’s arguments?

    1. Top marginal rates over time have had little correlation with what is actually paid. In 1969 the top rate was 70%, but some seven-figure earners deducted to zero, inspiring the AMT. Today no such earner can deduct near zero.
    2. Gross federal revenue as a percentage of GDP numbers have been terribly skewed by spending through the tax code in recent years. Sure, the government only “took in” 16% of GDP, but if you just exclude the people paying negative taxes (I call that welfare spending), then it shoots up dramatically. What’s the difference between a subsidy, credit, deduction, or handout, anyway? Money ends up in the same places.