Ruth Marcus Demonstrates How To Misunderstand Tax Cuts
An article by Ruth Marcus claims, “The modern Republican argument about taxes seems to boil down to two principles, both misguided: Taxes can be reduced, but they can never be allowed to go up. And whatever level taxes are at, they are too high.”Her argument continues and sounds something like this. Bush cut taxes and look, the Clinton surplus is gone and and so is the Social Security surplus. Lower taxes are bad. Ruth Marcus has solved taxes in America without even understanding them! Tim Pawlenty said. "I don't think the argument can be credibly made that the United States of America is undertaxed compared to our competitors."
What does Ruth Marcus say? “Actually, the United States is on the low end in terms of the overall tax burden -- 28 percent of the gross domestic product in 2007, according to the Organization for Economic Cooperation and Development, compared to an average of 36 percent in the 30 OECD countries. Only South Korea, Mexico and Turkey were lower.” Who knew it was that simple! Ruth Marcus is a genius or incredibly misinformed.
To be overtaxed or undertaxed you aren't just looking at the overall tax burden. That simplistic view wouldn't fly in high school debate. You have to relate the tax burden to what it funds. Since America is still on the lower end of socialist policies it makes sense that we have a lower overall tax burden. That doesn't mean that we are getting our money's worth out of our taxes. Furthermore, since Pawlenty refers to being “undertaxed compared to our competitors” it is pretty clear he is referring to the corporate tax in America. According to the The Organization for Economic Co-operation and Development America has the second highest corporate tax rate in the world at 39.25 percent narrowly edging out Japan. Don't hold Ruth Marcus accountable for not being informed though. We love her misinformation.
Marcus pundits on quoting, “Senate Minority Leader Mitch McConnell proclaimed the other day that the Bush tax cuts actually raised money. “There's no evidence whatsoever that the Bush tax cuts actually diminished revenue," the Kentucky Republican told Brian Beutler of the website TPMDC. "They increased revenue, because of the vibrancy of these tax cuts in the economy."” Wow sounds convincing. What was Ruth's response?
“Here's some evidence. Tax revenue fell from 21 percent of GDP in fiscal 2000 to 17.5 percent in 2008. (I'm leaving out the recession-induced plunge, to under 15 percent this year and last.)”
Earth to Ruth! Tax revenue as a percentage of GDP doesn't tell you if revenue increased or decreased because it doesn't tell you how much GDP increased. Proponents of tax cuts say that the economic growth makes up for the lower tax rate. Ruth Marcus just plain doesn't know what she is talking about.
Now I don't entirely agree with McConnell. Revenue did decrease from $1.85T in 2002 down to $1.78T in 2003. I say that with the caveat that they were not passed until May 23rd, 2003 and were retroactive to the beginning of the year. That means that almost a full five months of economic activity was taxed at a lower rate while the economy acting like taxes were higher. In 2004 the federal revenue increased to $1.88T narrowly passing 2002 revenue levels but showing strong growth through 2006. In 2006 federal revenue had increased to $2.4T. If you just look at 2003 you can argue that federal revenue did decrease. If you look through 2006 revenue is arguably higher than it would have been without the tax cuts. I am omitting 2007-2009 obviously because of the recession caused by the collapse of housing and finance industries. The collapse had nothing to do with the Bush tax cuts.
This all goes to show that Ruth Marcus has no idea what she is talking about when it comes to tax cuts and the economy. That doesn't mean she holds back at all when it comes to misunderstanding and misquoting economic statistics. When you see false commentary like this you start to wonder if anyone at the Washington Post has an economic background or cares about accuracy.
Tyson Bam
July 28th, 2010
