Massive confusion watch: The New York Times sells you the flat tax!

SATURDAY, OCTOBER 22, 2011

Why voters know squat about taxes: On Thursday morning, we were transfixed by the New York Times’ latest editorial about the very bad people of Alabama—the very bad people who aren’t like us.

For that reason, we’ve just read Thursday’s news report by Catherine Rampell—a report in which Rampell discusses Republican “flat tax” proposals.

Why do voters know so little about taxes? Why have Republican narratives and frameworks been swallowed so widely down through the years? In our view, Rampell’s attempt to explain the “flat tax” sheds light on these seminal questions.

Let’s take this in three easy pieces. To read Rampell’s piece, just click here.

Must a “flat tax” proposal be regressive: As she starts to explain how a flat tax would work, Rampell says that adoption of a flat tax “would generally make the tax system more regressive.”

In the real world, that statement is accurate. But let’s make sure we’re clear on the way this works:

RAMPELL (10/20/11): A major result of adopting a flat tax would generally make the tax system more regressive, thereby reducing the percentage for high-income earners but increasing burden on lower-income groups.

“It’s just simple basic math,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a liberal research group. “To the extent that it is revenue neutral, a flat tax implies large tax increases on middle-class people and, mirroring that, a major tax cut on wealthy people.”

Ignore the jumbled pseudo-English in that highlighted sentence. Just for clarity’s sake, let’s frisk the claim that adopting a flat tax “would generally make the tax system more regressive.”

That’s probably true for any plan any Republican would ever propose. If a Republican proposes a revenue-neutral “flat tax” plan, it will typically raise the burden on middle-class people, lower it on high earners.

But just for clarity’s sake, a “flat tax” doesn’t have to work that way. Suppose a candidate proposed a 40 percent single tax rate, with an exemption on all income under $100,000. Presumably, that would lower the tax burden on most lower- and middle-income earners, raise it on those at the top.

No Republican would ever propose that plan. But a “flat tax” doesn’t have to be regressive by its very nature. You could propose a single-rate tax which would be highly progressive.

How many Americans "pay very little or no taxes:" As she continues, Rampell begins to discuss the overall shape of the current tax system. As she does, her writing is very unclear—and it tends to favor the talking-points of pseudo-conservative disinformation machines.

Why are so many voters so disinformed about our tax system? In part, thanks to fuzzy-math writing like this:

RAMPELL (continuing directly): For some conservatives, however, the regressive nature is actually a positive result of the flat tax system. Under current policy, the wealthiest earners are paying a higher tax rate than the poorest, with some Americans paying very little or no taxes.

That fact has angered many Americans who think they are shouldering too much of the country’s tax burden. The “99 Percent” slogan of Occupy Wall Street protests, for example, has been countered with a “53 Percent” movement, referring to the fact that 53 percent of Americans pay federal income taxes (although many more pay payroll taxes).

You can defend that passage as “technically accurate.” We think it’s very poorly crafted.

In her second paragraph, Rampell specifies that she is talking about “federal income taxes.” But as she starts, she paints a fuzzier, sweeping picture, in which the wealthiest earners are paying a higher tax rate than the poorest, “with some Americans paying very little or no taxes.”

That is a very murky portrait. It echoes right-wing claims which are designed to make people think, incorrectly, that higher earners and middle-class earners are being hugely ripped off.

Is it true that “some Americans pay very little or no taxes?” Actually yes, it is. Six-month-old babies don’t pay any taxes, to cite one striking example. But even second-graders have started to pay taxes in the form of state and local sales taxes. And if we look at the overall American tax system, the overall system is much less progressive than one might suppose or have heard. That is to say, if we factor in all taxes, including state and local taxes, the overall burden on high earners doesn’t differ by a huge amount from the burden on those in the middle.

Most American voters don’t know such things. We can think of two major reasons:

First, journalists like Rampell write fuzzy-math crap like this. Second, the liberal world has never really tried to explain these matters to the public. If you have a conservative or centrist friend who doesn’t understand the overall tax burden, would you know where to send your friend to see these matters explained?

Of course you wouldn’t! That location pretty much doesn’t exist. And to the extent that such data exist, you don’t know where to find them. In recent decades, plutocrat disinformation has been constant—and we liberals have slept in the woods, enjoying our nearly-wet dreams about how much smarter we are.

Does a “flat tax” make things simpler: Over the past several decades, several basic scams have driven the pseudo-conservative “flat tax” movement. As she continues, Rampell swallows one basic scam whole.

A “flat tax” would make the tax system simpler, Rampell parrots:

RAMPELL (continuing directly): The effects of these various proposals aside, replacing today’s labyrinthine tax system with a flat tax does have the virtue of simplicity. Americans would spend less time, and endure fewer headaches, figuring out how much they owe the government.

“Simplicity is good, but that’s not all you want,” said Roberton Williams, a senior fellow at the Tax Policy Center. “If all you want is simplicity, you could just tax everybody $10,000. That would be easy and simple. But most people wouldn’t think that’s fair.”

Would a “flat tax” make things simpler? Would Americans “spend less time, and endure fewer headaches, figuring out how much they owe?” This is one of the basic claims at the heart of the flat tax movement.

At its heart, this claim is a con. Rampell doesn’t seem to know.

Our federal tax code is of course extremely complex. It runs to truckloads of pages. But as anyone but a Times economics reporter can grasp, this complexity isn’t mainly caused by the fact that the tax code employs six different income tax rates. (At present, this ranges from a 10 percent tax rate on taxable income below $8500 to a 35 percent rate on taxable income above $379,151.)

Some complexity is created by the use of multiple tax rates, of course. But the application of those rates can be shown in a single chart! And duh. Once a tax-payer knows his taxable income, he can simply look at another chart to see how much he owes. He doesn’t have to do the multi-part computation himself. For the most part, Americans don’t “endure headaches figuring out how much they owe the government” because of those six different tax rates.

The real complexity in the tax code doesn’t come from the multiple rates. The real complexity comes from the endless deductions and exemptions which define the taxpayer’s taxable income. In itself, switching to a single tax rate wouldn’t affect that vast complexity. The complexity lies in the endless deductions, not in the multiple rates.

Plutocrats pimping the “flat tax” idea have always encouraged this point of confusion. Rampell swallows it whole in this passage, encouraging the bogus idea that a “flat tax” proposal automatically eliminates the tax code’s vast complexity.

In conclusion:

Why do voters understand our tax system so poorly? Over the past three or four decades, three players have been involved here:

Pseudo-conservative think tanks have run powerful disinformation machines, creating massive confusion. In response, liberals have tended to sleep in the woods, offering little attempt at clarification. We tell the public they’re slobbering racists. After that, we rest.

The third player here is the national press corps. Rampell is an economics writer for our biggest “liberal” newspaper.

Must we tell you more?

For connoisseurs of confusion only: Rampell’s murky writing continues as she discusses Steve Forbes. If you’re a connoisseur of murk and confusion, go ahead—keep reading. Enjoy.