Naive (at Best) Reporters and False Tax Equivalence

by Neil H. Buchanan

Is the craziness that we are seeing unique to the post-November 8, 2016 era, or has it been there all along?  That is, is the problem specifically about Donald Trump, or is it the tumorous manifestation of a more systemic and longer-metastasizing cancer?

Observers have been asking some version of this question nonstop for more than a year, and it does not seem to matter what the subject is.  Racism, xenophobia, attacks on the rule of law, and on and on.  Is it all because of Trump, or is he merely a crude version of something else?

On the issue of taxes, it is clear that the problem goes far beyond Trump.  Republicans have spent decades honing their ability to lie about taxes, from fabricating stories about the miraculous effects of the Reagan and Kennedy tax cuts to embracing the "tax cuts pay for themselves" nonsense that once was sidelined even within their party.  And why stop asserting that family farms and businesses have been ruined by the estate tax (oh, sorry, Republicans absolutely must mis-describe it as the Death Tax) merely because they lack even a single example of that ever happening?

But the tax circus of late 2017 also reminded us how much of the problem is not directly about Trump or the Republicans but is instead a matter of credulous reporting.  Whereas non-Fox news sources have at least tried to adapt to the nonstop lies of the Trump era on non-tax issues by pointing to evidence (immigrants are not more likely to commit crimes than non-immigrants; we do not have a trade deficit with Canada; etc.), press coverage of debates about taxes still tends to be mindlessly neutral at best and a megaphone for conservative disinformation at worst.

In fact, I all but tore my hair out multiple times last year (see, e.g., here, here, and here) when reading mainstream press coverage about the tax debate.  If ever there were a case of reporting as stenography, this was it, as reporters dutifully repeated Republican talking points about growth-inducing tax cuts, dynamic effects, and the whole familiar litany of BS.

Now that the tax debate is in a temporary lull, reporters have fewer opportunities to make the kinds of mistakes that can seriously damage the policy conversation, but they do continue to try.

Republicans have figured out that they can play the press for fools, including even top-notch news sources like The Washington Post and The New York Times, when it comes to taxes.  Consider a recent small-to-medium-sized example, drawn from a Post column last month regarding the recent federal spending bill:

“Despite the administration’s attempts to slash [the Internal Revenue Service’s] budget, lawmakers grant[ed] $11.431 billion to the nation’s tax collectors, a $196 million year-to-year increase and $456 million more than Trump requested. The figure includes $320 million to implement changes enacted as part of the GOP tax overhaul plan.”

Think about this. Even though the number of tax returns has increased and both parties have added to the IRS’s responsibilities for decades, the IRS’s budget has been slashed significantly for years. Trump then proposes a further cut in the agency's budget, and Republicans instead pass a small net increase – but the increase is less than the amount that the agency must spend to try to implement the Republicans’ complicated new tax law.

Or, to put it differently, the IRS has seen its budget for everything else that it does cut by $124 million ($320 million minus $196 million).  Congress has essentially said: "OK, now you have to implement and enforce this new tax law that we threw together without hearings.  Here's three-fifths of the money that you'll need to do the job.  Now go cannibalize the rest of your shrunken budget for the other two-fifths."

Yet this cut in the IRS's ability to do its job is described by a reporter as a budget increase, relying on a literal reading (year-to-year dollar increases in total appropriations).  It certainly is true that Trump's proposal would have been even worse, but that is hardly an excuse.

I am not saying that the reporter was being deliberately misleading, but it is this kind of careless reporting that encourages Republicans to think that they can continue to get away with attacking the tax system.  "Hey, we continued to hack away at the IRS's budget, but we made it look like a budget increase, and reporters fell for it!"

To be clear, this lapse is not nearly as bad as major newspapers repeating Republican talking points about how tax cuts will surely increase economic growth, or accepting right-wing talking points about how repealing the estate tax would somehow be stimulative, but it is still depressing to see how little push-back Republicans receive from supposedly skeptical reporters. If I were a Republican, I would certainly feel emboldened by this kind of coverage.

What is more depressing is that even some skeptical coverage of tax issues can end up falling into all-too-familiar patterns of credulous reporting and false equivalence.  Consider a recent article at FiveThirtyEight, which is in many ways an excellent piece of reporting.  Even so, it ends up equating two very different strategies by Republicans and Democrats in order to take a safe, "both sides do it" stance of faux-neutrality.

The article makes some important and welcome points.  It helpfully (unlike that Post piece) puts the IRS's budget in some historical perspective, noting that the budget was cut by $2.2 billion inflation-adjusted dollars from 2010 to 2016, leading to a thirty percent reduction in "key enforcement operations" and an $8.6 billion decline in revenues from audits and investigations.

The article also reports the fact (well known among those who study taxes) that tax cheating is concentrated among small businesses, and the new law that Republicans passed with no Democratic votes will make that kind of cheating even easier.  If ever there were a party rewarding its loyal base, this is it.  (Of course, much of the cost of the bill is due to huge tax cuts for large corporations and the wealthy, so Republicans certainly made it rain for everyone in their donor base.)

So why am I so upset?  The article begins by saying that both parties are now in on the anti-tax game, not just the Republicans.  Is this a matter of finding Democrats from red states who break ranks and sign onto Republican talking points?  That actually happens far too often.  But no, the reporter asserts that "tax dodging has found a new champion" in liberal state governments that are trying to figure out how to work around the Republicans' reduction of the state-and-local tax (SALT) deduction on federal taxes.

That provision of the new law -- which actually cost some Republican votes in the House on the overall bill because of its affect on once-safely-Republican suburban districts in places like New Jersey and California -- targets blue states and their residents.  Republicans were actually rather candid, bordering on proud, about that fact.  As Professor Dorf pointed out at the time, that made the SALT limitation unconstitutional (though difficult to prove in court).

Since then, Democrats in state governments in the affected states have tried to figure out legal ways to frustrate this Republican political hit job.  They have discussed, for example, recharacterizing their state income taxes as charitable contributions, relying on a loophole that conservatives created to turn tuition at religious schools into "donations" for federal tax purposes.  New York's Democrats are talking about replacing their tax system with a payroll tax, which would still be deductible under the Republicans' misbegotten new law.

This is the reporter's proof that "tax dodging has found a new champion"?  Unlike Republicans, Democrats are not trying to make it easier for people to cheat on their taxes by undermining the tax agency.  Unlike Republicans, they are not lying about the magical effects of their tax policies.  Unlike Republicans, they are not publicly vilifying tax collectors and spending years (and millions of dollars) investigating and re-investigating a non-scandal at the IRS or calling for the impeachment of the agency's commissioner.  Unlike Republicans, Democrats have not fomented an atmosphere at the IRS that is so toxic that good civil servants are leaving in fear and disgust.

What Democrats are doing is openly trying to figure out if there is a legal way to work around a bad law.  That does mean that they are trying to reduce the federal tax bills of some of their residents, but not because they are anti-tax.  Indeed, they are trying to make it possible to continue to collect the state taxes that they have been collecting in order to provide the services that Republicans disparage as rewarding "the takers."

But even if blue-state Democrats were trying to figure out legal ways to reduce their citizens' overall taxes, that does not make them champions of tax dodging.  I strongly believe in the importance of paying taxes, but I do not pay more than the law requires.  I take deductions for charitable contributions.  I accurately report my income and use the lowest rate allowed when computing my tax liability.  That is the difference between tax avoidance and tax evasion.

Republicans have spent decades carrying out stealth tax cuts for their wealthy donors by making it easier for those donors to cheat on their taxes without being caught.  Democrats have occasionally failed to stand up as firmly as they should have to those attacks -- especially when the Obama Administration overreacted to the non-scandal in 2013 and thus reinforced Republicans' claims that something horrible had happened -- but they have not encouraged tax dodging.

Now, however, we learn even from an apparently well informed reporter that any open, legal effort to reduce people's taxes is no different from aiding and abetting tax fraud.  No wonder Republicans think they can win every political debate simply by bringing up the subject of taxes.