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After Republican presidential nominee Donald Trump reiterated his plan not to release his tax returns prior to the election due to an IRS audit -- despite the IRS saying he is not precluded from doing so -- media figures questioned the legitimacy of Trump’s excuse, arguing instead that it could be due to his possible business dealings with Russia, paying little to no taxes, and not giving to charity, among other reasons.
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The Wall Street Journal's editorial board praised Donald Trump's running mate, Gov. Mike Pence (R-IN), for economic growth in Indiana during his time in office -- ignoring the paper's own reporting that the state's growth "resembles overall U.S. performance under Obama."
The Journal’s editorial board heaped praise on Pence’s handling of the Indiana economy on July 20, pointing to the governor’s conservative policies as something “the rest of the country could emulate” -- dismissing President Obama’s economic record as part of the reason for the state’s success and ignoring the paper’s own reporting that the state’s growth “resembles” national trends. The Journal touted the point that under Pence, Indiana’s unemployment rate dropped from 8.4 percent to 5 percent, also noting that he cut income taxes from 3.4 percent to 3.3 percent and has amassed a budget surplus (emphasis added):
President Obama visited Elkhart, Indiana, on June 1 to tout the state’s economic recovery, taking credit for its success and claiming that it represents the 2016 election’s basic policy choice. He’s right, but the economic lessons speak better of GOP Governor and vice presidential nominee Mike Pence and his predecessor Mitch Daniels than they do Mr. Obama’s policies.
All states have seen declines in the jobless rate, and Indiana’s has fallen to 5% in May from 8.4% in 2013 when Mr. Pence became Governor. The Indiana difference is that the rate has fallen even as the labor force has increased by nearly 187,000. Many states have seen their jobless rates fall in part because so many people have left the labor force, driving down the national labor participation rate to lows not seen since the 1970s. The Illinois workforce has grown by only about 71,000 in the same period, though it is roughly twice as large. Indiana is adding jobs fast enough that people are rejoining the workforce.
Mr. Pence has continued the progress, cutting taxes every year of his tenure even as the state has continued to pile up budget surpluses. He cut the individual tax rate to 3.3% in 2015 from 3.4% and it will fall to 3.23% in 2017, the lowest in the Midwest, according to the Tax Foundation. One reason the tax rate can stay so low and flat is because it applies to a relatively broad base of income with fewer loopholes than more steeply progressive tax codes.
The Journal’s editorial board claimed the job growth seen in Indiana is “different” because “the [unemployment] rate has fallen even as the labor force has increased,” an idea dismissed by Politico on July 19, which wrote “the drop in Indiana’s unemployment almost perfectly mirrors the national trend. And the labor force has grown in all but nine states.” A report by the Associated Press (AP) also found that the state’s unemployment rate “largely paralleled the national mark.” The parallel unemployment trends can even be seen in the Journal’s own graph from a July 16 article that undercuts Pence's ownership claim of Indiana's recovery:
The Journal’s rhetoric resembles praise Trump had for Pence’s handling of the Indiana economy -- which so closely mirrors the U.S. economy that MSNBC’s Steve Benen argued if Pence did a “great job producing economic results, by Trump’s own reasoning, it’s hard not to consider Obama an amazing success.”
The Journal’s editorial board touted Pence’s income tax cut, but upon closer inspection by the AP, that tax cut works out to be a mere $85 for someone making $50,000 a year. The AP also called into question the budget surpluses the Journal praised, reporting that Pence’s surpluses drew criticism after an infrastructure crisis in which opponents blamed “a handful of roadway deaths on Pence’s desire to build a budget surplus at the expense of properly funding infrastructure.” (The willingness of Republican governors to raid infrastructure funding to fill budget gaps created by trickle-down tax cuts has been well-documented.)
Pence has also been accused of politicizing Indiana’s health budget. On June 6, 2015, the Chicago Tribune reported on one of the Indiana towns facing an opioid crisis and how Pence’s “war on Planned Parenthood” inadvertently created an “exploding HIV outbreak” in his state. When Indiana Republicans cut funding for Planned Parenthood, they cost some parts of the state their only HIV testing centers, leading to an outbreak of the virus among intravenous drug users and their sexual partners and forcing the state to eventually provide emergency funding for needle exchange programs.
Other Republican-led states have seen their economies falter after implementation of conservative policies; Kansas and Louisiana have been devastated by Gov. Sam Brownback's and former Gov. Bobby Jindal’s trickle-down economics -- Brownback’s Koch-backed tax cut program has been particularly destructive. Like Pence, Ohio Gov. John Kasich claimed his conservative policies led to an economic “miracle” for his state, but it is easy to demonstrate how Ohio’s economic recovery pre-dated his term of office and is also largely following the national trend.
Day Two Of The Republican National Convention Focused On Emails, Benghazi, And Clinton-Bashing
The second day of the Republican National Convention (RNC) was billed as an opportunity to highlight Republican presidential nominee Donald Trump’s proposals to boost job creation and economic growth. Journalists blasted the RNC and Trump campaign after the speakers ignored the economy and instead attacked Hillary Clinton over issues like the Benghazi attacks and her use of a private email server.
Adviser Steve Moore Pushes New Round Of Confusing Talking Points About Whether Trump Tax Plan Exists
Economic adviser to the Trump campaign Stephen Moore responded to critiques of Trump’s published tax plan by underscoring that the campaign’s plan is not “even finalized,” while still pushing a series of confusing claims about the revised plan’s specifics. Moore assured Fox Business’ Charles Payne, however, that he would “love” the new plan.
Moore, a conservative economist and Fox contributor, appeared on the July 15 edition of Fox Business’ Cavuto: Coast to Coast to discuss criticisms of presumptive Republican nominee Donald Trump’s tax proposals, which were first rolled out in September and are still currently detailed on the campaign’s website. Moore’s defenses of the plan largely consisted of repeating the Trump talking point that the plan is currently being “revised” and “finalized.” Protesting critiques of the Trump tax plan already made public, Moore complained “it’s like declaring the New York Yankees the winner in a game after the fifth inning -- I mean, the game isn’t over yet because we haven’t put [the plan] together.”
Payne and Moore rehashed that Donald Trump would be “hands off” on entitlements and is not interested in cutting “social security, medicare.” Payne then claimed Trump “is going to double the size of the military” -- an assertion Moore was unsure about. Moore claimed the Trump tax plan would stimulate the economy “from 2 percent growth to 4 percent” by slashing taxes and that these tax cuts will be paid for by that growth and by cutting federal spending dramatically:
Moore argued that economists and critics pointing out that the numbers of the current plan don’t add up “don’t know what they are talking about,” because it is being revised. The plan, as it stands now, has been panned by economists.
Moore’s claim that tax cuts will be balanced by cuts in spending do not, in fact, add up: The nonpartisan Tax Policy Center (TPC) and the conservative Tax Foundation each scored the current tax plan and found that that it would explode the deficit by $9 to $12 trillion over the next decade, on top of the $9.4 trillion in projected deficits at current spending levels. Trump would need to cut almost one trillion dollars in federal spending per year, which is more than all non-military discretionary spending.
The Tax Foundation’s analysis concluded that Trump’s current tax plan would boost investment and wage growth while creating up to 5.3 million new jobs, but those figures relied on a so-called “dynamic” scoring model that has been criticized for overestimating the stimulative value of tax cuts. According to a September 2014 report from the Brookings Institution, tax cuts do not necessarily create economic growth and they can even discourage growth by undermining economic incentives to invest. A September 2012 report from the Congressional Research Service (CRS), which was suppressed by Senate Republicans, similarly found no correlation between tax cuts and economic growth, but it did caution that tax cuts for high-income individuals “appear to be associated” with rising inequality.
Moore has a long and well-documented history of distorting facts on the economy. Nobel Prize-winning economist and New York Times columnist Paul Krugman, who has spent years documenting Moore's repeated failures in economic policy, recently slammed the right-wing commentator’s "impressive lack of even minimal technical competence" upon learning the economist would be involved in re-working Trump’s tax proposals.
Fox Business host Stuart Varney tried to undermine a guest during a segment lamenting the Democratic Party’s supposed “move to socialism,” but his right-wing rhetoric couldn’t hold up to criticism.
On July 14, Varney invited Occidental College political scientist Caroline Heldman -- a self-described socialist and strong supporter of Sen. Bernie Sanders’ (I-VT) presidential campaign -- to discuss Sanders’ impact on progressive politics. After a cordial start, the conversation quickly devolved as the host began shouting over his guest when she said that “there hasn’t been a radical shift to the left” in the Democratic Party. Varney became increasingly irate after Heldman argued that “Bernie Sanders isn’t even a socialist, he’s just a New Deal Democrat.” Several minutes of increasingly tense exchanges followed, during which Varney talked down to his guest, claimed that her position on taxation was “totally immoral” and “unconstitutional,” and labeled her opinions “nonsense.” He eventually turned the rest of the segment over to a Republican strategist and lobbyist who attacked Heldman after her appearance was over and she could no longer defend herself:
This was not Heldman’s first run-in with a rude and overzealous Fox host armed with little more than contempt and partisan talking points. In April 2010, Heldman went after Fox News host Bill O’Reilly for courting “racial fearmongering” in his attacks against progressive policies. In April 2011, Fox host Eric Bolling brushed off her advocacy for expanded worker rights as “a part of our American fabric” with a thoughtless and sexist nickname: “Dr. McHottie.” A few months later, in December 2011, Heldman slammed Bolling for promoting baseless fears about in-person voter fraud. And in a March 2013 appearance on MSNBC’s Politics Nation, Heldman remarked that she had “never met a group of people who is so upset that the economy is rebounding than the folks over at Fox.”
As for Varney’s attempt at a substantive critique of Heldman, he claimed at the end of the segment that she could not identify an example of high taxation coinciding with increased economic growth. She had provided that example, the economic boom of the 1990s under President Bill Clinton, when higher taxes did not stymie economic growth. Varney also claimed that the wealthy pay too high a share of income taxes in this country, seemingly citing a Wall Street Journal article from 2015 that says the top 20 percent of earners contribute 84 percent of income tax revenue. But many economists have argued for higher tax rates; Dirk Krueger and Fabian Kindermann even said the “optimal” tax rates for the top 1 percent of U.S. earners could be as high as 90 percent.
Manhattan Institute Scholar Peddles Right-Wing Media Myths In Call To Increase Taxpayer Subsidies Of Poverty Wages
A New York Times op-ed by a senior fellow at the Manhattan Institute pushed the debunked claim that raising the minimum wage would hurt business and American workers and promoted the expansion of tax credits for workers struggling with poverty. The op-ed failed to mention the high public cost of pushing more of the burden on taxpayers while letting businesses off the hook from paying workers a living wage.
Manhattan Institute senior fellow Peter Salins claimed that raising the minimum wage constitutes “playing a kind of economic Russian roulette” in a July 6 op-ed in The New York Times, suggesting that instead of raising wages, policymakers should ask taxpayers to foot the bill for increased subsidies for poverty wages. Salins’ proposal, which is a common refrain among conservatives, would shield employers from paying a living wage to their full-time workers by expanding the Earned Income Tax Credit (EITC). Salins claimed that advocates for raising the minimum wage “fail to acknowledge” that low-wage workers have access to the EITC.
Echoing a myth frequently promoted by right-wing media, Salins alleged that workers would be “priced out of the labor market by an unrealistically high minimum wage” and that the victories advocates for raising the minimum wage have already won may cause “grievous harm.” A $15 per hour minimum wage, in Salins’ estimation, could “reduce the total number of jobs nationally by three million to five million.” From The New York Times:
In this campaign season, politicians across the country (including the presumptive Democratic presidential candidate and perhaps even the Republican one) have called for raising the minimum wage. Not just marginally, as in the past, but all the way to $15 an hour, more than double the current national level of $7.25. Even elected officials and candidates in states with higher minimum wages like New York have jumped on the $15 an hour bandwagon. Their justification: “You can’t support a family on the current minimum wage.”
What the advocates fail to acknowledge is that minimum-wage workers with families to support are already eligible to receive a financial boost under a national program called the earned-income tax credit. This program, instituted in 1975 and expanded since then, paid benefits to 27.5 million low-income workers in 2014. (That same year, only three million workers fell at or below the federal minimum wage, so the credit also helped millions of other low-wage workers.) Technically, such payments are classified as “refundable tax credits,” paid to qualifying workers when they file their annual income tax returns.
That is the beauty of the tax credit; it helps low-skilled workers in proportion to their household need, taking pressure off the minimum wage as the only guarantor of a “living wage.” The credit thus performs a crucial function in a national labor market where one size most definitely does not fit all, a labor market that is enormously varied by region, by employers’ needs, by workers’ skills and by the potential for jobs to be replaced by technology. By allowing wages to reflect local economic and industry conditions, the earned-income tax credit makes it possible for all unskilled workers to have jobs — including those not eligible for the credit, like teenagers, single young adults or semiretired older people, who would otherwise be priced out of the labor market by an unrealistically high minimum wage.
Salins advocated for policies similar to those recently endorsed by Speaker of the House Paul Ryan (R-WI) and identified Ryan in the op-ed as a supporter of expanding the EITC (Ryan’s proposals also ignore the possibility of raising wages or strengthening worker rights). Salins suggested that a hypothetical working mom in a minimum-wage job with multiple dependent children already stands to benefit from the EITC, even though those income supports combined with her low wages would still leave her entire family in poverty. Salins did not mention that progressive groups such as the Center For American Progress (CAP) support raising the minimum wage and expanding the EITC along with other tax credits targeted at low-income families. The EITC has been shown to assist families in poverty, but it alone does not solve the problem of poverty, which is why CAP supports a multipronged approach to assisting low-income families: expanding EITC, raising the minimum wage, increasing educational opportunities, and strengthening worker protections.
While the EITC program can correctly be called “the most progressive” part of the tax code, expanding the credit would not be free -- and the federal government already spends $68 billion per year on the program. Whereas expanding the EITC would cost taxpayers money, simply raising the minimum wage would actually save money and shift the responsibility of paying a living wage onto businesses. According to a June 2016 report jointly produced by Oxfam America and the Economic Policy Institute (EPI), raising the federal minimum wage to $12 per hour would reduce federal spending on anti-poverty programs like the EITC by $17 billion.
Low-wage industries create burdens on taxpayers; the notoriously low-wage fast food industry alone costs taxpayers nearly $7 billion annually. Salins’ claim that the American economy would lose millions of jobs from a $15 per hour wage is also suspect because he based his numbers off a model that did not predict jobs losses, but rather the potential for a slightly lower rate of job growth. Right-wing media have a long history of pushing the same unsubstantiated arguments that Salins parroted in the Times -- claiming raising the minimum wage will kill jobs, hurt low-wage workers, and harm the economy -- all of which economists have repeatedly debunked.
The editorial board of The Wall Street Journal cited two working papers from 2015 as proof that the United States needs to lower its top marginal tax rates to keep and attract successful workers and “help the economy grow.” But one of the studies the editorial referenced debunked the paper’s trickle-down economic argument while the other study stopped far short of hailing tax cuts as a silver bullet solution for economic growth.
The Journal grumbled that the United States needs to cut federal income tax rates to keep and attract talent in a July 4 editorial titled “Why Everyone Needs A Tax Cut.” The Journal cited two working papers that investigated how top income brackets affected the migration patterns of the world’s top inventors and scientists -- one put out in March 2015 by economists with the National Bureau of Economic Research (NBER), and another released in December 2015 by economists with the Federal Reserve Bank of San Francisco -- to claim, “Lower marginal rates improve incentives and help the economy grow.” From The Wall Street Journal:
The authors, in hilariously dry academic fashion, dare to note that these “migratory responses to tax policy might represent a cost to tax progressivity.” Imagine trying to attract the top 1% of earners instead of driving them away.
All of this is worth keeping in mind the next time you hear Hillary Clinton attack Donald Trump or House Republicans for their tax-reform plans. Lower marginal rates improve incentives and help the economy grow.
The Journal failed to mention that its conclusions are not supported by the research it cites. The United States has the lowest top tax rate of the developed countries NBER researchers surveyed. Additionally, while the San Francisco Fed did conclude “that state taxes matter” in terms of the interstate migration of top-tier workers and corporations, there is little evidence that the “[l]ower marginal tax rates” the Journal supports would actually “help the economy grow.”
The NBER researchers the Journal referenced broke down their findings in a blog for the London-based Centre for Economic Policy Research, noting that they looked at the effect tax cuts had on retaining and attracting “superstar inventors” in eight developed countries -- Canada, France, Germany, Italy, Japan, Switzerland, the United Kingdom, and the United States. Of these eight countries, the U.S. had the lowest top tax rate and, according to the researchers, would experience the smallest gains in terms of newly attracted workers from cutting taxes. The authors argued that “labour, like capital, might be internationally mobile and respond to tax incentives,” but “language, distance to one’s home country, and career concerns” are other factors to consider when workers are choosing where to live:
According to data compiled by the CIA, the United States ranks among the bottom quarter of countries in the world in terms of how much taxation it collects as a percentage of gross domestic product (GDP). The U.S. ranks 171st out of 219 countries, with just 18.1 percent of GDP going toward income taxes, consumption taxes, and tariffs. By this metric, taxation in the United States looks more akin to the Caribbean tax havens of the Bahamas (172nd) or Bermuda (176th) than to the developed economies of France (12th) or Germany (24th).
On several occasions throughout the text, the San Francisco Fed paper makes the point that “[w]hile there are many other factors that determine where innovative individuals and innovative companies decide to locate … relative taxes matter.” This might seem to support the Journal’s embrace of the misleading “tax flight” myth commonly deployed by right-wing media against states like California and New York, which are known for their high taxes and Democratic-led state governments. Yet, as Nobel Prize-winning economist Paul Krugman argued in a July 29 blog for The New York Times, the high-tax states often targeted by conservative outlets are not being outperformed by low-tax states in terms of economic growth:
Attracting such individuals as those the Fed paper deems to be “star scientists” is important, but the number of people likely to be involved is extremely small. The authors estimate that a 2006 tax cut in New York increased the number of “star scientists” in the state by 28 total individuals in a state with 19.3 million residents and more than 8.6 million workers.
Right-wing media outlets, including the Journal, frequently complain about the high tax rates imposed on American workers and businesses, but the facts lead to the opposite conclusion. It is not clear why the Journal chose these papers as the basis for its argument, but the conclusion of most independent research on the economic effects of cutting taxes reveals no evidence that it spurs economic growth.
Kansas Transportation Secretary Resigns After Tax Cuts Put Agency In Financial Peril
Slate has joined The New York Times and The Kansas City Star in highlighting what’s wrong with Kansas’ “insane right-wing experiment” of drastically cutting taxes, explaining that the Republican-led state “is about to destroy its roads.”
In 2012, Republican Kansas lawmakers led by Gov. Sam Brownback enacted a series of tax cuts -- described by the Star editorial board as “disastrous” and the Times editorial board as “ruinous” -- that deeply cut revenue streams without generating the strong economic growth conservatives promised would follow. Instead, the state has fallen into financial crisis leading to a painful credit downgrade, a massive budget shortfall, and a “negative” credit outlook for the future. Brownback’s tax cut policies were nonetheless endorsed by right-wing media personalities and created a model for other conservative politicians to follow.
On June 30, Slate reported that Brownback had announced the resignation of his state’s secretary of transportation, Mike King, marking the latest casualty of Kansas’ failed experiment with trickle-down economics. According to Slate, the reason King is leaving may be that the state has taken $2 billion from the Kansas Department of Transportation’s reserve funds to close gaps elsewhere in the budget. Former Kansas transit secretary Deb Miller cautioned that the “weakened revenue stream” would be “more subject to political whim.” From Slate (emphasis added):
Kansas has had trouble paying for much of anything since 2012, when conservative legislators decided to implement a bevy of right-wing economic policies—and lead their state into a fiscal crisis.
In order to keep funding its government despite dramatically decreased tax revenue, the legislature has flipped all their piggy banks. One of them is the Kansas Department of Transportation—or what sarcastic Kansans now call “the Bank of KDOT,” for the stupendous quantity of money that has been diverted from its coffers to the Kansas general fund and state agencies.
On Wednesday, Brownback announced that Mike King, the secretary of KDOT, would be resigning this month. King, who was appointed in 2012, has presided over a rather unusual period in Topeka finance.
Since 2011, according to the Kansas City Star, the state has diverted over $1 billion in “extraordinary” transfers from KDOT. If you include “routine” transfers, from 2011 through the 2017 budget year the total diversion from the Bank of KDOT will amount to more than $2 billion.
That’s more than KDOT’s annual expenditures. It’s as if the state, which has the fourth largest number of public road miles in the nation, had taken away a full year of road funding.
King’s predecessor, Deb Miller, told the Topeka Capital-Journal this week that King “started as KDOT secretary at a time when the agency had a well-defined and solidly financed statewide highway program. He exits an agency deeper in debt and with a weakened revenue stream more subject to political whim.”
Brownback’s legacy will be grander, but we could call this the Mike King doctrine: Plugging holes in the budget; leaving holes in the road.