How liberals mislead about the tax history of the past 30 years

President Obama’s (latest) soak-the-rich plan is bringing out the worst in his fellow liberals. If you want to understand exactly what’s wrong with their mindset on taxes, and why it is irreconcilable to reality, you must read Michael Tomasky’s column in the Daily Beast today.

Not because Tomasky points out the deficiencies. On the contrary, he recites nearly every one of them with gusto.

To begin, Tomasky states that taxes — not spending, not debt, nor cultural politics, nor anything else — have been “the biggest problem in our politics for the last 30 years.” By “biggest problem,” he apparently means what follows:

The anti-tax revolt that started in 1978 in California (Proposition 13) has destroyed this country. Our taxophobia has made the rich vastly richer and reduced the amount of money for the public benefits the rest of us depend on, and a hundred other horrible things besides.

One can hardly argue against “a hundred other horrible things” that Tomasky hasn’t specified, but there’s plenty to discuss about what’s wrong with the rest of that second sentence.

Part 1: “Our taxophobia has made the rich vastly richer…”: Really? The top marginal tax rate in the Internal Revenue Code is what’s made the rich “vastly richer”? Not such economic trends as the shift toward an information-based services economy, or the ever more rapid rise of global manufacturing competition, or the change in the way corporate boards have awarded executive compensation? Or any of the things Tomasky means, several paragraphs later, when he acknowledges, “A hundred factors affect economic performance”?

Certainly, lower tax rates have allowed higher earners to keep more of what they earn, which has compounding effects on wealth, but the tax code does not explain why those higher earners are earning more than did the higher earners of earlier generations. Which is where the “problem” Tomasky identifies really begins. If you agree that this is a problem, the tax code is not the place to “fix” it.

Part 2: “…and reduced the amount of money for the public benefits the rest of us depend on…”: I didn’t realize columnists at the Daily Beast were on welfare — and with “the rest of us,” Tomasky is necessarily excluding those public functions (e.g., the military) that benefit everyone regardless of income. But that’s a side point. Have lower tax rates really “reduced the amount of money” sent to the government?

From 1944 (the first year federal revenues exceeded even 14 percent of GDP) through that year Tomasky so rues, 1978, federal revenues averaged 17.6 percent of GDP.

From 1979 through 2010, the last complete fiscal year, federal revenues averaged 18 percent of GDP.

Hmmm. That can’t be correct. We all “know” that Republicans since Reagan have been starving the beast. The post-1979 data must be skewed by the Clinton years, right?

Well, federal revenues certainly flourished under Bill Clinton, averaging 19 percent of GDP. But even if we exclude 1993-2000, federal revenues since 1979 have still averaged 17.7 percent of GDP — that is, just a tad more than they averaged before 1979.

OK, Wingfield. But we all “know” that George W. Bush completely obliterated the federal fisc with his ruinous tax cuts.

Not really. Federal revenues from 2001 to 2008 averaged 17.6 percent of GDP. Exactly what they averaged before that dread year of 1978.

It turns out that the Clinton years were an anomaly in modern tax history. Do Tomasky and his fellow travelers truly believe that those eight years were the only ones in which America wasn’t being “destroyed”?

***

So, the premise of Tomasky’s piece is demonstrably wrong. But that doesn’t stop him from making another crucial error.

Presumably, he writes, President Obama’s plan “will include taxing capital gains and carried interest at the same rate (for millionaires only, that is, not for middle-income Wall Street dice-rollers) as regular income.” Presumably, he’s right about that.

Yet, a bit later, he suggests that Rep. Paul Ryan is “stupid, a liar, or something even more malevolent, a morally diseased ogre who secretly believes with his delirious mentor [Ayn Rand] that the rich deserve every handout government can offer them” for saying Obama is engaging in class warfare and claiming these tax increases won’t work economically. Set aside for now Tomasky’s repugnant rhetoric — it hardly qualifies as an argument — that anyone who disagrees with Obama’s position on taxes must lack intelligence, honesty or morals. He unintentionally undermines his own claims — and the argument for raising capital gains tax rates — here:

Under what recent president was the economy strongest? Bill Clinton. Under what recent president were tax rates the highest? Bill Clinton. I don’t claim direct cause and effect. A hundred factors affect economic performance. But I certainly and emphatically claim that recent history disproves Ryan’s [claim that tax increases don't work] to such an extent that he can’t possibly be taken seriously.

If Tomasky won’t claim direct cause and effect, it’s not out of modesty. It’s because it’s not true.

Under which years of the Clinton presidency was the economy strongest? I don’t think anyone would dispute that it was the years 1997 through 2000, when real GDP growth surpassed 4 percent every year. But which part of tax policy changed during this second term of Clinton’s? Not the individual income tax rate; that increase came in 1993. No, it was the tax rate on capital gains, which actually fell in 1997. Tax receipts and the economy soared.

Now, they soared because of the tech bubble, which produced the growth and stock earnings that were taxed in such large numbers. Like Tomasky, I’m not claiming direct cause and effect. But unlike him, I know it defies logic and the facts to claim that the Clinton years prove higher taxes on capital gains won’t hurt the economy.

I’ll leave Tomasky to his opinions as to whether all of this will make for good politics. But, if the American public understands what really happened during the past 30 years, he’ll be wrong about that, too.

– By Kyle Wingfield

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200 comments Add your comment

DebbieDoRight

September 20th, 2011
9:43 am

“Our taxophobia has made the rich vastly richer…”: Really?

Yes really.

The top marginal tax rate in the Internal Revenue Code is what’s made the rich “vastly richer”?

The tax shelters and tax credits have. And yes, before you say that “these laws are put in place for everyone to use”, (basic Con argument); not everyone can use that Luxury Boat deduction, or the private jet deduction; OR the deduction for owning multiple housing (apartments/condos) facilities.

Junior Samples

September 20th, 2011
9:58 am

Thanks for the new buzzword/talking point Kyle.
Job Creator is now Higher Earner. Tired of defending that one I suppose…

Bobby Taylor

September 20th, 2011
10:02 am

You did a great job toting your water today for the rich and powerful.

You earned your thirty pieces.

Don't Tread

September 20th, 2011
10:02 am

“anyone who disagrees with Obama’s position on taxes must lack intelligence, honesty or morals”…how many times have I heard versions of that line since 2008?

Liberals can’t win an argument based on reason…so they start in with the name-calling, as evidenced here by the comments directed towards Paul Ryan.

Liberalism is what’s wrong with this country today, not the tax rate.

Joe the Plumber Too

September 20th, 2011
10:05 am

Debbie, you are right but the reason that not everyone can use those tax breaks is in most cases because of laziness. You choose your path in life, it doesn’t choose you. They lowlifes who depend on EBT to feed the family, genration after generation, all the while buying the Jordan’s and lottery tickets and cell phones ( the list goes on) have done the damage to themselves. I came up on the east side and didn’t fall into the trap of hanging on the corner all night and getting in trouble. I finished school, did my military service and worked my way up in my chosen profession to the point I could have my own company. I didn’t do it with wealth envy or on the backs of others, I didn’t use race as a crutch or a reason for advancement. I did it myself because I had pride in myself. I still don’t have a luxury boat or private jet, doubt I ever will but I own mutiple rental houses and duplexes and use every deduction I can to keep as much of MY MONEY as I can, I pay my fair share and deserve what I earn. The every person doesn’t start out on equal footing crap has gotten old.

MarkV

September 20th, 2011
10:06 am

Kyle: “Certainly, lower tax rates have allowed higher earners to keep more of what they earn, which has compounding effects on wealth, but the tax code does not explain why those higher earners are earning more than did the higher earners of earlier generations. Which is where the “problem” Tomasky identifies really begins. If you agree that this is a problem, the tax code is not the place to “fix” it.”

It is not? Why not? It is exactly the progressive tax rate that corrects the excesses of the earning differences.

ByteMe

September 20th, 2011
10:06 am

Liberalism is what’s wrong with this country today, not the tax rate.

Only having two viable political teams is what’s wrong with this country today, not liberalism.

MarkV

September 20th, 2011
10:07 am

Kyle,
Your critique of Tomasky’s piece would be more credible, if you did not use the same type of arguments, while pretending you do not. Tomasky writes that he did not claim cause and effect, while in effect he did. You have done exactly the same: “I’m not claiming direct cause and effect.” At the same time: “But which part of tax policy changed during this second term of Clinton’s? Not the individual income tax rate; that increase came in 1993. No, it was the tax rate on capital gains, which actually fell in 1997. Tax receipts and the economy soared.” In effect, you have claimed that it was the cut in the tax rate on capital gains that caused the tax receipts and economy to soar, not the individual income tax rate. You point is that the latter happened in Clinton’s first term, and the former in the second term. Are you so naïve that you think the economy reacts so fast to changes like tax rates?

jt

September 20th, 2011
10:08 am

.

Liberalism is what’s wrong with this country today, not the tax rate.
.
No true liberal would ever support Obama.
You’re confusing progressives with liberals.
And progressives…….righty progs like Kyle and lefty progs like Bookman………are what is making life more difficult in this country for freedom-loving Americans.
.
Ron Paul 2012.

ByteMe

September 20th, 2011
10:09 am

the reason that not everyone can use those tax breaks is in most cases because of laziness.

Written like someone who has never really lived around anyone who was truly poor. Oh, that’s right, there but for the grace of God and all that…..

KyleKyleGoAway

September 20th, 2011
10:15 am

So sorry you’re back, Kyle. Last week was wonderful without you. Your disingenuous, obfuscating blather is old, tired, worn and dead wrong.

Joe the Plumber Too

September 20th, 2011
10:15 am

byteme, yeah you got me, coming up in east point in the early sixties was like living in country club of the south. What a fool.

JB

September 20th, 2011
10:29 am

Liberal progressive policy is a losing proposition, for losers. Cubans risk their life to get in the country for a reason, and sitting back and letting the government take care of them, and being over taxed and over regulated, is not it. They’ve had that exposure. Canada’s top corporate rate is now about 16%. Wonder how they are doing.

carlosgvv

September 20th, 2011
10:31 am

Kyle, Obama’s plan is not a soak-the-rich idea. It is a pay-your-fair-share-of-taxes plan. Republicans have made it clear who funds their election and re-election campaigns and you may be certaing lobbyists for Big Business have made it clear to Republican politicians that NO tax hikes of any kind will be tolerated. None of your convoluted and arcane writings will hide these simple facts.

Kyle Wingfield

September 20th, 2011
10:31 am

MarkV @ 10:07: I put “tax receipts and the economy soared” there for sequencing purposes. I probably should have added “nevertheless” to be clearer.

GoAway: I take it you don’t have an argument based on facts, just — what did you call it? — blather.

Kyle Wingfield

September 20th, 2011
10:32 am

carlosgvv: What you call “convoluted and arcane” I call “fact-based.”

Kyle Wingfield

September 20th, 2011
10:34 am

Junior @ 9:58: No, it’s just a different conversation.

KyleKyleGoAway

September 20th, 2011
10:36 am

Kyle @ 10:31 – why waste my time with rational, fact-based arguments when they don’t mean anything to you? you are completely blinded by your ideology and either too stupid or ignorant to even realize it. Ad hominem? You betcha but you really are that annoying and clueless

duder

September 20th, 2011
10:36 am

Many of the so-called tax loopholes exist thanks to charitable donation. To Bernie Marcus’s point at Warren Buffett’s latest diatribe- would you rather that he built the Georgia Aquarium or the government do it? Would you rather he create the Marcus wing of Grady Hospital or the government?

Kyle Wingfield

September 20th, 2011
10:39 am

Yes, GoAway, why should you make an argument rather than call names?

OK, that’s enough troll-feeding for today.

Junior Samples

September 20th, 2011
10:39 am

Joe the Plumber Too,

Against all common sense, you choose to invest Your Money into rental property. Nobody forced you into it. Taxes were part of the deal before you made this decision, and will be afterwards. There are no get-higher-earning-quick-schemes (did I get that right Kyle?). Keep in mind that when you invest in anything, it’s no longer your money. You’ve handed it over to someone else on the hope that you will get a return on that investment. With property, there will be property taxes. Plain and simple.

Debbie’s comment was regarding the tax breaks afforded to the top 1 percent of higher-earners (did I get that right Kyle?). Therefore its not afforded to everyone else, including you and I.

I wish you luck.

JDW

September 20th, 2011
10:40 am

@ Kyle, who wrote…”It turns out that the Clinton years were an anomaly in modern tax history.”

Indeed they were…here are some other things that were different,

For example:

Average GDP increase under Clinton was the highest in the last 30+ years

1977-1980 (Jimmy Carter, Democrat), +3.25%
1981-1988 (Ronald Reagan, Republican), 3.4%
1989-1992 (George H. W. Bush, Republican), 2.17%
1993-2000 (Bill Clinton, Democrat), 3.88%
2001-2008 (George W. Bush, Republican), +2.09%

http: //www. davemanuel.com/historical-gdp-numbers-united-states.php

Clinton was the only President since LBJ to DECREASE national debt as a % of GDP and was responsible for the only balanced budgets in memory.

http: //uspolitics.about.com/od/thefederalbudget/ig/Political-Economic-Measures/Debt-GDP-by-President.htm

As for Jobs…

23.1 million jobs were created during Clintons years, by far the most of any President. In fact more than during the terms of Reagan, Bush 1, Bush 2, and Ford COMBINED.

http: //blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

So Kyle, instead of blathering on about the unproven if not disproven theory of tax cuts for the wealthy creating jobs maybe the thing we should do in go back to WHAT ACTUALLY WORKED…but that would be an “anomaly” now wouldn’t it?

JB

September 20th, 2011
10:41 am

1.Jobs
2.Israel
3. Lack of leadership
4. Serving as President to a “select” group of Americans
5. BS won’t pass the smell test anymore.

Five things Obama can’t overcome to get reelected…….

MarkV

September 20th, 2011
10:42 am

duder @10:36 am: “Would you rather he create the Marcus wing of Grady Hospital or the government?”

Why not the government?

Kyle Wingfield

September 20th, 2011
10:45 am

JDW: C’mon. Reagan inherited the deepest post-war recession we’d seen until the most recent one (deeper in some ways, though not as lengthy, as the most recent one…which says something about policy responses). HW Bush presided over a recession that ended on his watch, leaving Clinton to benefit from a nascent recovery and leave office just as the tech bubble burst (which was of course compounded by 9/11). W Bush of course inherited the resulting recession.

As for Obama, I don’t think any serious person disputes that he was dealt a bad hand, only that he’s responded to it well.

In any case, you’re too smart to believe that economic and political cycles align so neatly.

HDB

September 20th, 2011
10:45 am

I’m going back a bit further than Kyle would…..but the nation experienced its greatest expansion of both the wealthy and middle class under the Eisenhower Administration when the optimum tax rate was 90%…and no one really complained!! The wealthy maintained their wealth…and the greatest expansion of the middle class occurred..and Eisenhower wasn’t a progressive!!

JB

September 20th, 2011
10:51 am

MarkV………I’m in construction. I’ll tell you why. The government would allow someone not qualified to build it, and it would cost more and not be built as well. I could give you many examples of the government “propping” up many unqualified contractors. Next question.

Joe The Plumber too.

September 20th, 2011
10:52 am

junior- “Against all common sense, you choose to invest Your Money into rental property”
Don’t know about your approach to common sense but by investing in run down properties for the past twenty years, I’ve done pretty good with my common sense, better than it sitting somewhere waiting to be gobbled up by government unless of course I put it into municiple bonds, nope wait urkle wants to up the federal tax on that also in his new JOBS bill. I guess if I was in the market to sell some of them right now it might be a different story but why would I do that, I maintain almost a 100% occupancy rate year in year out. Not bad for a POOR boy from the eastside because I was unlucky enough to have been born POOR. So I’m pretty happy with my choice, good defending of little debbie though even if she wasn’t being attacked.

Kyle Wingfield

September 20th, 2011
10:52 am

Make that NOT responded to it well.

Kyle Wingfield

September 20th, 2011
10:53 am

HDB: I think you mean you’re going back farther than Tomasky would.

mike "hussein" smith

September 20th, 2011
10:58 am

By now, Boy Wonder, you should realize something: One person rarely speaks for massive numbers of them (except, of course, in the Tea/GOP Party). I’m an off-the-compass liberal but I happen to think this Tomasky guy isn’t the brightest bulb at the Kmart. For you to paint him as such is for me to claim you take your marching orders from AnnCoulter. So, take that.

Scooter

September 20th, 2011
10:59 am

I say we shouldn’t demonize anyone in America, even the wealthy. Instead we should pursue collective clarity by implementing the FairTax so wealthy people will pay a hefty tax on their luxuries. Even better, those luxuries would be considerably cheaper if produced in the U.S. Through that, we would make “made in America” more price competitive and bring home jobs, tax all retail consumption above the poverty line and take away the politicians tool to dole out favors. It’s a win win for the people.

KyleKyleGoAway

September 20th, 2011
10:59 am

Kyle @ 10:39 – lmao. There are plenty of facts (real, actual, true, incontestable facts) presented above, though they may be ‘inconvenient’ as regards your puerile arguments. Again, you are too stupid and/or ignorant to process and synthesize them. At the risk of sounding redundant: why waste my time presenting factual counterpoints? It’d be no more fruitful than trying to convince David Irving that the Holocaust did, in fact happen. See my dilemma?

mike "hussein" smith

September 20th, 2011
11:01 am

HW Bush presided over a recession that ended on his watch, you write. But when did it start? Back in the 1970s? Hell, no. That leaves Ronald Reagan and his 8 years of cutting taxes to the faithful as the only culprit.

MarkV

September 20th, 2011
11:02 am

JB @10:51 @”The government would allow someone not qualified to build it, and it would cost more and not be built as well.”

This is the usual silly argument that the government does everything badly and the private industry does everything well. It just denies the realities. There are many projects not associated with the government that end up badly, and many projects of government/private industry partnership that work well. You only see what you want to see..

duder

September 20th, 2011
11:05 am

@MarkV

The government has a track record for its inability to deliver a better product at a better price than the private sector. The USPS and public schools jump to mind immediately. One is corrupt and the other bankrupt, you decide which is which.

HDB

September 20th, 2011
11:08 am

Kyle…going back further than BOTH of you would!! :)

Joe The Plumber too.

September 20th, 2011
11:08 am

Better go charge a few ebt cards. Glad you are back Kyle.

Jefferson

September 20th, 2011
11:09 am

If the GOP’s tax policies and spending records were so great, how did this president ever get elected? And I’m supposed to belive a proven liar Party?

Anti_lib

September 20th, 2011
11:13 am

Of course liberals mislead, they can’t stand that facts aren’t on their side!

MarkV

September 20th, 2011
11:15 am

duder @ 11:05 am: “The government has a track record for its inability to deliver a better product at a better price than the private sector. The USPS and public schools jump to mind immediately. One is corrupt and the other bankrupt, you decide which is which.”

Where are your data of the track record? Do you consider all the private companies that go bankrupt each year because of mismanagement? It is easy to see the fault of the government and ignore the failures in the private sector. To reduce the complex issue of USPS to an example of a private vs. public is a nonsense, and the issue of public/private schools does not belong to this discussion at all..

JDW

September 20th, 2011
11:15 am

@Kyle, wish I had time to fully thrash this out but here is the short version…

You wrote “Reagan inherited the deepest post-war recession we’d seen until the most recent one (deeper in some ways, though not as lengthy, as the most recent one…which says something about policy responses). ”

I don’t believe the situation Reagan inherited was anywhere close to the scope of the recent crisis. In fact the prime driving force behind that recession was the Iranian oil crisis. As that eased, so did the problem.

Kyle wrote “HW Bush presided over a recession that ended on his watch”

Which was created by Reagan.

Kyle wrote “leaving Clinton to benefit from a nascent recovery”

Which he supercharged by raising taxes and cutting deficits.

Kyle wrote “and leave office just as the tech bubble burst (which was of course compounded by 9/11). W Bush of course inherited the resulting recession.

Which he promptly made worse in the long-term by lowering taxes and raising deficits.

Kyle wrote “As for Obama, I don’t think any serious person disputes that he was dealt a bad hand, only that he’s responded to it well.”

I would not say bad but I would agree that he has not gone far enough with some things. In particular he should have moved to cut deficits by restoring tax rates, focused on creating jobs by revamping regulations and stimulating the funding of NEW businesses. He also lost his chance at impacting health care in a meaningful way and shot himself in the foot by allowing the deficit ceiling debate to even occur.

Kyle wrote, “In any case, you’re too smart to believe that economic and political cycles align so neatly.”

They don’t and government can’t control them only influence. That said small actions can have big impacts that play out over long times and underfunding the government and creating large deficits is one of those. Reagan, Bush, Cheney et al…allowed themselves to believe that “deficits don’t matter”…in a given year or two not so much…since 1980 in a big way.

Kyle Wingfield

September 20th, 2011
11:17 am

hussein @ 10:58: I’ll grant you that Tomasky isn’t a spokesman for the left. But the lines he trots out — about the tax code robbing the poor to satiate the rich, about the Clinton economy being the best evah in spite of the tax code (ignoring the part about capital gains taxes) — happen to sound an awful lot like the ones trotted out by other liberal pundits and a lot of commenters here.

And @ 11:01: Only if you believe that presidents cause recessions.

Ron

September 20th, 2011
11:17 am

I would quote from a NYtimes article “Federal revenue comes primarily from taxes, including income, Social Security and excise taxes. This revenue total is projected to claim just 14.9 percent of gross domestic product in 2009. The last time federal revenue crept below 15 percent of G.D.P. was in 1950, when it fell to 14.4 percent. Since that time, federal revenue has averaged about 17.9 percent of the economy.”

Kamchak

September 20th, 2011
11:17 am

JDW

September 20th, 2011
11:23 am

@Kyle, one more thing on this whole tax cuts thing. The entire theory is built on the idea that if people have more money they will spend it leading to higher demand for products thus jobs….problem in today’s world is twofold. First if the cuts go to people that don’t spend it they do no good. Nor does investing in the stock market do any good relative to direct job creation. Only money that is invested in NEW businesses or direct business expansion does any good and that turns out to be a very low percentage of the tax cut.

Conversely when taxes are increased and government borrowing is reduced then money that would have gone to buy government securities must find a new home. Lots of times that home is banks or bonds. Those are normally funding sources for either new businesses or business expansion and those do in fact lead to new jobs.

Kyle Wingfield

September 20th, 2011
11:23 am

Ron: And if you believe that revenues are based solely on the tax rates, and have nothing to do with the number of people working and paying taxes, or with economic growth, then that’s all you need to know.

Kamchak: Please. Economic growth had to fall to zero before it could fall below zero. The slowdown was already under way before the technical recession was began.

Joe The Plumber too.

September 20th, 2011
11:24 am

One last thing, this couldn’t be true could it? Well that just blew a hole in urkles wealth envy plan.
“Data compiled by the nonpartisan Tax Policy Center show households pulling in more than $1 million pay about 29.1 percent of their income in federal taxes. By contrast, households making between $50,000 and $75,000 pay about 15 percent.”

carlosgvv

September 20th, 2011
11:24 am

Kyle – 10:32

So, asking the rich to simply pay their fair share of taxes is “soaking them”? And you call that “fact based”?

Kamchak

September 20th, 2011
11:27 am

The slowdown was already under way before the technical recession was began.

You did not however say that Bush inherited a “slowdown.”

You said he “W Bush of course inherited the resulting recession.”