Supplemental: Candidate Carson reveals his tax plan!

TUESDAY, JANUARY 5, 2016

And the New York Times instantly bungles:
No one actually cares at this point, but Candidate Carson has finally unleashed his formal tax proposal.

For unknown reasons, Carson describes his plan as "a true flat tax." Before we discuss the problem with that designation, let's note the inevitable:

The New York Times has massively bungled its account of the Carson proposal.

As noted, no one actually cares about the Carson proposal. At the Times, they haven't even done a hard-copy report about the crazy effects of the Trump tax proposal, which was released in September.

That said, the Times did offer a quick blog post about the Carson proposal. No one actually cares what Candidate Carson has proposed. But if they did, it must be said that Alan Rappeport basically bungled his basic account of the plan:
RAPPEPORT (1/4/16): The proposal is centered on a 14.9 percent tax for people in all income brackets and for companies, while eliminating deductions for mortgage interest, charitable giving and local taxes. Mr. Carson also would do away with taxing capital gains or interest income. Low-income people and families, defined by having incomes below 150 percent of the federal poverty level, would have to make a smaller, unspecified payment.

The changes would mark sharp reductions from the top personal tax rate of 39.6 percent and the corporate tax rate of 35 percent.
Nothing in that account is "wrong." That said, Rappeport omits a basic provision of the proposal:

Quoting Carson's formal proposal, "the flat tax applies only to income above 150 percent of the Federal Poverty Level (FPL). For example, a family of four will not pay the 14.9 percent tax on their first $36,375 of income."

That makes a rather large difference. Under Carson's actual plan, a family of four with a $40,000 income owes virtually no federal income tax—roughly $540. If we go by the report in the Times, it sounds like that family of four would owe almost $6000!

Is the exemption in question implied by what Rappeport wrote? Not exactly, no. That said, how hard is it to go ahead and state such a basic part of the plan?

It isn't hard at all! Bernie Becker even managed the feat at Politico, which is frequently feckless:
BECKER (1/4/16): Carson would only use the flat tax on income above 150 percent of the poverty level—exempting, for instance, the first $36,375 of income for a family of four. Taxpayers making below that level would face “a de minimis tax payment,” which was unspecified.
That's a very basic part of the plan. Politico explained it quite clearly. Inevitably, the glorious Times failed to spell it out.

(In fairness, the Times doesn't care about things like tax rates. The Times cares about who has recently said the word "schlonged," and about the senses of humor of the various candidates. It cares about who's insulting who in what way, and about other such matters.)

You won't likely encounter much discussion of the Carson proposal. Candidate Trump seems to be headed for nomination, and the nation's major newspapers aren't even discussing his plan, which is manifestly crazy.

That said, it might be worth considering one last question. Why in the world would someone want to call this proposal a "flat" tax plan?

Plainly, it's a "single-rate" plan. But why would we call it "flat?"

Traditionally, the basic idea behind a "flat" tax involved a contrast to "progressive" taxation. Everyone was going to have to submit the same percentage of his or her income!

That doesn't happen with Carson's plan. A family of four earning $40,000 will owe less than two percent of its income. A family of four earning $100,000 will owe roughly ten percent. A family earning $1 million (or more) will owe almost 15 percent.

Under the Carson proposal, people end up submitting different percentages of their incomes, just the way it is at present. There is one major difference, of course: at the upper end of the income scale, people would presumably pay much less under the terms of this plan.

In short: when single-rate plans include a large standard exemption—in this case, $36,375 for a family of four—they end up being "progressive." Lower earners pay a very small part of their income. Higher earners pay a much larger percentage of their income, but at a 14.9 percent rate, they would pay much less than they pay under current law.

As such, the endless piffle about a "flat tax" is largely a sack of gorilla dust. Almost always, the claim of flatness is a distraction from the real goal—tax cuts for upper-end earners.

At any rate, the New York Times has messed up again. We can't stress this last point enough:

It isn't a competent newspaper.

12 comments:

  1. One thing I would note. Under current tax law, that family of four making $40,000 pays zero federal income tax. They may even get a refund of part of their $2,000 child tax credit. Also, in 2012, such a couple would get an EIC of $406. So Carson is not only proposing to cut taxes for the rich, he is proposing to increase taxes for that couple (and people like them). That couple would be paying over $900 MORE under Carson's plan than under current law.

    For some reason nobody in the media says WTF? about that.

    It seems likely that actual people making $40,000 or less would say that about a proposal to increase their taxes. Luckily for Carson and the Republican Party, such people will never hear about it from the M$M.

    ReplyDelete
  2. "Low-income people and families, defined by having incomes below 150 percent of the federal poverty level, would have to make a smaller, unspecified payment."

    What's the problem? The limitation is right there in Rapoport's piece. Is it that the actual payment for those below 150% of poverty is "unspecified"? This kind of carping about NYT reporting is tiresome.

    ReplyDelete
    Replies
    1. What's the problem with your reading, skepto:

      It's NOT right there in the piece that there's any standard exemption for the first $36K of income for people who make more than that.

      Delete
    2. Here is the problem. The NY Times is trying to perpetuate the fiction that this is a flat tax by deemphasizing the low income exemption.

      It says: "The proposal is centered on a 14.9 percent tax for people in all income brackets and for companies, while eliminating deductions for mortgage interest, charitable giving and local taxes."

      That is a mischaracterization intended to support the fraud that this is a flat tax. The exemption and de minimum tax levied on those below the poverty designation are described later and make it clear this is not a flax tax as claimed.

      Claiming to enact a flat tax is a big deal among Republicans. Flat tax is a buzz word and it gets Carson votes. It is important to state that he is not actually planning to enact a flat tax.

      Delete
  3. Well, to be fair, Rappeport attended the London School of Economics. They don't have our tax system over there, so Rappeport has probably not learned its ins and outs.

    ReplyDelete
  4. I just wonder why simplifying to a flat tax wouldn't also mean rounding 14.9% to 15% - I can manage that one without a calculator.

    ReplyDelete
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