- Category: Opinion
David Herbst makes a heartfelt plea in a recent opinion piece for reforming the tax code. Unfortunately, sincerity is no substitute for accuracy.
Herbst is Montana director of Americans for Prosperity, and his evidence appears to rely on a nine-page report issued in July by a deputy director of AFP and an analyst for Freedom Partners. Both groups are funded by the Koch Brothers, conservative activists who must have been delighted to find they could get the results they wanted if they were willing to pay for them.
A few minutes spent reading the AFP report exposes the rigor that went into its production. Serious reports about the federal tax system are full of qualifiers and caveats; AFP allows for no such pussyfooting. Its evidence is highly selective and quite misleading.
Herbst opens his column with a “history lesson” that consists of just two factual assertions purporting to demonstrate that “cutting taxes creates jobs and puts more money in your pocket.” The first is that tax cuts under President John F. Kennedy in the 1960s created 9.3 million jobs. The second is that tax cuts under President Ronald Reagan in 1981 raised per capita disposable income by $2,715.
The AFP report provides a crucial detail that Herbst omits: Both statistics cover the first five years after the cuts were enacted. That means the Kennedy tax cuts basically matched the length of the Johnson administration, when job growth on an annual percentage basis was 3.9 percent, the highest in the post-World War II era.
But that growth vanished when Johnson left office. Job growth didn’t hit 3 percent a year again until the Carter administration, and it hasn’t hit 3 percent since, despite dramatic tax cuts under Reagan. The closest it came was under President Bill Clinton, following a pair of tax increases.
The wage picture is even less persuasive. Reagan was elected in 1980. From 1979 to 2013, wages for the top 1 percent of income earners grew 138 percent. Wages for the bottom 90 percent grew just 15 percent.
Indeed, a 2012 report by the nonpartisan Congressional Research Service found no clear relationship between cutting top tax rates and economic growth. “However,” the report found, “the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.” After Senate Republicans complained, the CRS withdrew the report.
A 2014 report by the Brookings Institution found no relationship between taxes and growth rates. From 1870 to 1912, the report notes, federal tax revenues were just 3 percent of Gross Domestic Product, and GDP per capita grew at a rate of 2.2 percent a year. In 1913, the Constitution was amended to allow a federal income tax, and that was followed in short order by two world wars, the Great Depression, and the whole vast expansion of the welfare state. From 1947 to 1999, the highest marginal income tax rate averaged 66 percent, federal revenues averaged 18 percent of GDP – and annual GDP growth was 2.2 percent a year.
Carefully designed tax cuts can increase revenues, the Brookings Institution found, but only if they are accompanied by spending cuts, and only if those spending cuts target expenses that don’t contribute to growth. AFP’s blunderbuss approach doesn’t seem to qualify.
Worse than Herbst’s analysis are his AFP-endorsed solutions. First, he wants to “eliminate the unfair special favors and handouts that rig the economy in favor of the powerful and well-connected.”
Pretty hard to argue with that. Tax deductions and exemptions are called “tax expenditures,” and a 2012 Congressional Research Service report found more than 200 of them in the tax code. Lots of flab there.
But just 20 tax expenditures account for nearly 90 percent of the revenues, and some of those expenditures are quite popular with people who aren’t powerful or well-connected – the mortgage interest and property tax deductions, for example.
Suppose you have two childless couples each earning $50,000 a year. They should pay the same taxes, right? But suppose one of them is hit one year by a crippling $25,000 medical bill. Think they should get a tax break? You have just endorsed a tax expenditure.
Herbst also favors a cut in what he calls the highest corporate tax rate in the industrialized world. He probably knows, but fails to mention, that various tax provisions reduce the rate for most corporations enough to greatly lower what they actually pay, and many corporations pay no taxes at all.
Finally, Herbst wants to reduce the number of income brackets, a change that would mean almost nothing to the average taxpayer. Those of us who insist on filling out our own returns know that the hard part of paying taxes is figuring out income and itemizing deductions. Once that work is done, we get the actual tax from a tax table. Even if there were a hundred tax brackets, our work would be no harder.
As one professor of law and business put it, “The number of brackets has an almost imperceptible effect on the complexity of tax law as it is lived by the individual taxpayer. … The call for fewer tax brackets in every case has as its real motive lowering the tax burden on the highest-income Americans, not making life simpler for the middle class.”
The fact is, taxes are complicated because the world is complicated. One effort to cut through the clutter is the alternative minimum tax, which ensures that the richest Americans have to pay some reasonable tax no matter how many loopholes their lobbyists and tax attorneys find. You may have noticed that one rich American, President Trump, wants to get rid of that tax.
In reality, paying taxes has gotten easier, not harder, for most people. Most tax forms can now be downloaded in seconds from a home computer – no last-minute scurrying to the post office hoping to find a Schedule E. Cheap calculators and spreadsheets have eased the math pain. Expanded personal exemptions have reduced the need to itemize. For the millions of Americans who can file Form 1040-EZ, Herbst’s dream of being able to pay taxes on a form the size of a postcard is nearing reality.
If Herbst really wants meaningful reform, he should instead tackle Montana’s income tax. Not only are Montana taxpayers required to reproduce much of their federal data on the Montana form, they must work through a laundry list of tax credits, deductions and exemptions. Many taxpayers who don’t have to itemize their federal taxes have to itemize for Montana.
Moreover, married couples really ought to figure their Montana taxes twice because rates may be lower for those who file separately.
If Herbst wants to take on that nightmare, I’m on board. Otherwise, he’s just asking us to join him up on that Big Rock Candy Mountain, where they hung the jerk that invented work.
- Category: Opinion
by David Crisp
Steve Daines, the freshman U.S. senator from Montana who sits on the back-benchers’ back bench, got a rare taste of notoriety last week. He posted a video of his 15 seconds of fame on his Facebook page, so he must have been proud of it, but the episode showed Daines’ political weakness, not his strength.
Daines was presiding over the Senate when, in concert with Senate Majority Leader Mitch McConnell, he blocked Sen. Elizabeth Warren from finishing a speech against Sen. Jeff Sessions’ confirmation as attorney general. He and McConnell convicted Warren of violating Rule 19, which says that “no Senator in debate shall, directly or indirectly, by any form of words impute to another Senator or to other Senators any conduct or motive unworthy or unbecoming a Senator.”
Their decision to block Warren’s speech was upheld by a party-line vote of the Senate. A University of Miami political scientist could find evidence of only two similar votes in Senate history, the last in 1952.
What’s worse, Warren’s remarks weren’t aimed at Sessions in his capacity as a senator. They instead invoked accusations of racism that were used to deny Sessions a federal judge’s job back in 1986.
To have failed to reconsider those accusations at his new confirmation hearing would have been dereliction of the Senate’s duty. No matter how nice Warren might have tried to be about it, there is just no way to avoid imputing unworthy conduct to someone who lost a federal job because of racism.
Daines’ action drew more than 2,000 comments on his Facebook page. If you have the patience to read them all, perhaps you can find one praising his decision. I did not and could not.
Small protests against him went on in Montana, including one at his Missoula office, where members of the activist group Missoula Rises read aloud the letter from Coretta Scott King that Warren was quoting when she was ordered to sit down. Protesters tried to confront him at the Bozeman airport, but he walked away.
This is titillating but inconsequential stuff. Warren’s speech wasn’t going to change any votes. And the Senate rule is not a bad thing in itself. The elaborate courtesies senators extend to one another, insincere though they may be, serve a useful purpose.
We don’t want brawls breaking out in the Capitol, such as happened in South Africa’s parliament just last week. The daily virtual brawls in social media are bad enough; the U.S. Senate should set a better example.
- Category: Opinion
By Roger Koopman,
Oct. 26, 2016
Editor's Note: Here the incumbent Public Service Commissioner from Dist. 3 defends his record.
I have to admit that this has been a most unusual campaign. There has been almost no discussion by my opponents on issues of substance. Nor have they challenged of any of my positions or votes while serving on the PSC – something I would have welcomed talking about.
Instead, I have one opponent (Ms. Cooper) who insults my integrity, saying I have a “cozy” relationship with NorthWestern Energy, because I apparently accepted a small, fully reported donation from their employee PAC 12 years ago as a candidate for legislature. Cooper claims to be the only honest candidate in the race, because she refuses PAC donations. Yet when the Montana Conservation Voters PAC gave her a sizable in-kind donation in the form of a professional campaign school (valued at $225 over the minimal registration fee), she showed no intention of reporting it. Indeed, when MCV did the right thing, informing her that it was an in-kind PAC donation, Cooper went ballistic, filing a complaint against MCV with the Commissioner of Political Practices. This “honest” candidate clearly wanted to completely hide the donation from public disclosure.
Then there is Rep. Noonan, whose main charge against me is that I am (in his words) “a dangerous deregulator.” He’s not specific, so I have no idea what he’s talking about, because the Public Service Commission has no authority to deregulate anything. The deregulation of Montana Power was done by the legislature, and I opposed it at the time. If he’s referring to my commission votes allowing competition in passenger service (UBER) and approving consumer choice in garbage collection where monopoly now exists, I’m guilty as charged! But I hardly consider that dangerous. Apparently Pat does, since he voted against the popular UBER bill in the House.
For those who are confused by all of this, let me offer a straightforward description of my first term on the PSC. In every way and at every opportunity, I stood for the consumers of this state. I approached my work as a firm and fair regulator, always keeping the rate-payers’ interests forefront in my mind. On many key issues and key votes, I provided bold leadershjp in defense of the consumer, opposing sizeable rate hikes that previous commissions would have passively approved.
The PSC has been doing a very good job, resulting in residential electricity rates that in real, inflation-adjusted terms, have risen just 2.6% for NWE in the past four years, and declined 2% for MDU. (Ms. Cooper’s assertion that rates have increased 15% is pure, politically-driven rubbish.) Meanwhile, gas rates have declined for those utilities during that period, 21% and 17% respectively. Yet there is much work left to be done, as we face both the challenges and the exciting opportunities that lie before us. Utility regulation needs a major overhaul, with more incentive-based, risk-sharing approaches replacing the old paradigm of passing through to the customer every risk, cost and operational mistake.
As we face these critical issues that so greatly impact our families, our communities and our economy, I would be deeply honored to serve you for another four years on the PSC.
Public Service Commissioner, District 3
- Category: Opinion
by Josh Manning
This story first appeared at MTCowgirl.com
So let me say something for the other party, the Democrats that are supposedly against the military and patriotism (you said as much on the Montana legislative floor in 2015, Representative Art Wittich, who also was front and center at the GOP convention to show his support). You do not own this nation, its flag, or service to this country. I, we, do not own it either. But let it be known that no matter what their underlying beliefs, we do not attack or belittle the service of dead Americans or their families. Any of you who support or defend the actions and beliefs of the Republican candidate for President of the United States lack a moral center. It is as simple as that. Remember this on that second Tuesday in November 2016.