Monday night lights: Flat tax, soft heads, can’t win!

TUESDAY, OCTOBER 25, 2011

The New York Times just keeps trying to explain the flat tax: When it comes to domestic politics, the New York Times does truly terrible work.

Yesterday, in this news report, the sad newspaper continued to bungle its reporting of the emerging “flat tax” issue. For unknown reasons, Richard Oppel chose to start his report like this, with the first of many bungles:
OPPEL (10/24/11): As several leading Republican presidential candidates embrace a flat tax as a core campaign position, one contender stands out in not doing so: Mitt Romney, who has a long record of criticizing such plans and famously derided Steve Forbes’s 1996 proposal as a “tax cut for fat cats.”
Did Romney “famously” deride the Forbes flat tax proposal? Actually no, he didn’t. It’s true that Romney spent $50,000 on TV ads that year—on ads which attacked the Forbes proposal. But there was nothing “famous” about this action, in real time or later.

Did Romney “famously” deride that proposal? Sorry. That’s a novel.

According to the Nexis archives, this “famous” action was barely mentioned in the press in real time. According to the Nexis archives, the Washington Post mentioned Romney’s action just once, in a fleeting, single-sentence reference. According to the Nexis archives, the New York Times never mentioned Romney’s action at all.

Romney wasn’t a big deal at the time; his action wasn’t “famous.” Indeed, when did the New York Times first mention his “famous” action? Just last Thursday, in this variously bungled report by Catherine Rampell and Oppel! Romney’s action is so “famous,” New York Times first heard about it for the first time last week!

Nothing will turn on the silly bit of novelization which started Oppel’s “news report.” But this morning, we learn what Rick Perry’s “flat tax” proposal is—and we see how hapless the pre-reporting of this topic has been.

What has Candidate Perry proposed? In this morning’s New York Times, John Harwood explains:
HARWOOD (10/25/11): The plan includes a flat income tax rate of 20 percent, but it will also allow any taxpayer the option to remain under the current system, according to a person involved in the Perry campaign. Under current tax law, the wealthiest Americans face a marginal tax rate of 35 percent for much, if not most, of their taxable income

In addition, the plan has a $12,500 deduction for each person in a household, so, for example, two parents with one child would have the first $37,500 of income excluded under the plan.
Duh. As anyone could have predicted, the Perry proposal includes a substantial per-person deduction/exemption—a possibility the Times failed to discus in its hapless pre-reporting. For that reason, the Perry “flat tax” system would in fact be “progressive.” A family of four earning $50,000 in taxable income would pay no income tax at all. But these percentages would be paid by families with higher incomes:
Percentage of taxable income paid by a family of four:
With $75,000 income: 6.7 percent
With $100,000 income: 10 percent
With $200,000 income: 15 percent
With $1,000,000 income: 19.99 percent
Here we see one of the comical paradoxes of modern Republican “flat tax” proposals. Yes, a single tax rate is used—but because of the exemptions, families end up paying widely varying portions of their income. Under the Perry proposal, different families would pay anywhere from zero percent of their taxable income up to almost twenty percent. Or as Dick Armey wrote in his unintentionally comical 1996 book, The Flat Tax: “The flat tax is progressive” (see THE DAILY HOWLER, 11/11/04).

Given the fact that Perry has been working with Armey and Forbes, anybody could have foreseen that his plan would be “progressive”—that it would impose a higher burden on higher earners. Anybody could have foreseen this except major American “journalists.” Last night, for example, the always clueless Chris Matthews thoroughly bungled this topic during a masterfully uninformed segment on his grotesque cable program, Hardball.

Matthews, one of our biggest buffoons, never knows what he’s talking about. Last night was no exception. In a thunderous segment about the flat tax, he made misleading statements throughout. Eventually, he offered the know-nothing foofaw which follows. In this statement, he was stupidly focused on Romney, not Perry, trying to drive his flip-flopper script. But note his failure to explain how this “flat tax” fandango works:
MATTHEWS: You know, John [Feehery], you and I have similar backgrounds and values, I think, generally speaking. But let’s get to the heart of the reality of this thing, and maybe we can reach common ground here.

The average person watching this program right now may make—a single person may be lucky to make $40,000 or $50,000. A family may make about that, according to national averages. They may be retired living on less than that. They're looking at how this tax structure would affect them if the new person gets elected president. And if they're thinking of electing Mitt Romney, they would like to know what he is talking about.

If he's talking about a flat tax, the same percentage tax rate for everybody, that's serious business, because that means the rich people won't pay a higher percentage than the average person out there just making a living. Do you think that's a fair idea in concept?
That was just humongously stupid. Perry has now proposed a thoroughly typical Republican “flat tax” plan. Under his proposal, rich people would pay just under 20 percent; many middle-income people would pay nothing at all. In the modern Republican era, these “flat tax” plans have always been like that.

Trust us. Chris didn’t know that.

Indeed, Matthews had already described the 1996 Forbes proposal (or some successor to same) on last night's program. He did so in this sad uninformed fashion:
MATTHEWS: A flat tax is one rate. And that’s what they’re talking about. They’re talking about a single rate. If you make billions of dollars a year, you pay the same rough percentage, 17 percent is what Forbes has been talking about, as a guy making $50,000 or $100,000.
Sorry. Under the Forbes proposal (in 1996), the guy making billions paid 16.99 percent. The guy making $50,000 paid roughly four percent. A family of four earning $36,000 paid no income tax at all.

Matthews never knows what he’s talking about. Today, he pimps his scripts on the Democrats’ side, but he’s still a national disgrace—a prominent marker of our failed “intellectual” culture. But then, Oppel showed little sign in yesterday’s Times of understanding this topic either. His report was full of silly shit. Clarity was AWOL.

We’ll look forward to seeing a full analysis of the effects of the Perry proposal. But don’t worry—major news orgs like the Times and Hardball will bungle that too. At the Times, they’ll be confused and they'll be busily typing their novels. On Hardball, everything will be subjugated to Matthews’ personality-driven scripts.

You live inside a failing culture. It’s stunning to see the way political “reporters” work at the New York Times.

Break out the popcorn: To watch Matthews’ segment on the flat tax, click here. All three players are scripted and hapless—Mathews and his dueling “strategists,” Rep and Dem alike.

8 comments:

  1. The devil is always in the details. The Perry plan contains huge exemptions such as the mortgage interest rate deduction, and various form of investment income. To understand the burden of taxation, which is what I, at least, think progressivity should be judged on, it's necessary to look at a lot more then rates.

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  2. It's very simple. The flat tax benefits the rich, the billionaires, guys like Steve Forbes, the Koch brothers and Pete Peterson. It will reduce revenues so that the corporate elite who rule over us can have a lever to totally destroy Social Security, Medicare and Medicaid. The flat tax will do nothing for the middle class and the poor. It will not create jobs and it will reduce essential services. We are a nation of the super rich, for the billionaires and by the corporations, it's no longer we the people.

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  3. The revenues side of this debate seems to get the short end of the stick when the flat tax is discussed. Will Cain's 9-9-9 plan or Perry's flat tax or Forbes's flat tax bring in enough money? Who knows, since no one seems willing to calculate that one.

    Would such tax schemes be inflationary? Would they be stimulative? How would they affect interest rates? Who cares! Let's talk about how nice the numbers sound.

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  4. I agree with Alex Blaze. I think Cain's plan would bring in less revenue. There's no doubt that Perry's plan would bring in less revenue, since each taxpayer would pay either the tax under the current plan or the tax under Perry's plan, whichever is less.

    I also think these flat tax proposals are bad politics. Because of poor coverage like the cited column in the NYT, even though a large number of lower-middle class people would pay less tax, they won't realize it. Meanwhile, envious people will accurately note that the flat tax is a big benefit to the super-rich. And, people may eventually figure out that a flat tax doesn't simplify the tax preparation process.

    In fact, Perry's proposal makes tax preparation more difficult. Since each taxpayer would have the choice of the new system or the current system, s/he'd have to calculate the tax both ways to see which was more advantageous.

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  5. What does envy have to do with understanding the effects of the proposed tax plans, David? Is the button pushing a tic?

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  6. The key to making the discussions of the "flat tax" Perry proposed accurate is to say all taxpayers would pay the same percentage of taxable income. A Family of Four (FOF) making $50,000 would pay $0, which is 20% of the taxable income. A FOF making $51,000 would pay $200. A FOF making $100,000 would pay $10,000 (20% of $50,000 taxable income).

    Discussing taxable income also opens up the much more important discussion of what is not included (I don't know if he keeps the mortgage interest deduction or other deductions. These are very popular and trying to take them away would be political dynamite, even if you could prove "most people" would pay less.) But key to what is not "taxable income" is dividends and capital gains - thus, labor is penalized while passive income gets yet more special treatment. This is the Great Right Hope on taxes.

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