“Bobby Jindal, Crony Capitalist”: Giving A Whole New Meaning To The Term “Corporate Welfare”
As much as I hate entertainment tax credit programs, and as obsessed as I’ve become with the bottomless well of opportunism known as Bobby Jindal, you’d think I would have guessed at the cash nexus underlying the prize endorsement of the Lousiana governor’s proto-presidential candidacy by Duck Dynasty star Willie Robertson. But afraid it took a report from Bloomberg Politics‘ Margaret Newkirk to get me to see the connection:
Louisiana Governor Bobby Jindal, a potential Republican presidential candidate, is trying to close a $1.6 billion budget hole without touching as much as $415,000 per episode in tax breaks that may be due to “Duck Dynasty.”
The A&E television reality show takes part in the nation’s most generous entertainment-tax credit program. Jindal is proposing no changes, arguing that reducing such breaks is tantamount to raising taxes. The state approves enough incentives each year to make up at least $200 million in proposed cuts that led Louisiana State University to say that it may plan for insolvency….
Louisiana, which was the site of the most English-language film productions in the U.S. in 2013, pioneered movie credits, approving the program in 2002. All but 13 states now have such programs, according to Film Production Capital, a New Orleans firm that brokers credits….
Feeding Time Productions LLC, which produces [Duck Dynasty], has submitted expenses for its first four seasons that would qualify it for $11 million in credits once approved, according to state data. That includes $4.6 million for the fourth season, or $415,000 per episode. None have yet been certified.
Louisiana offers movie makers credits for 30 percent of in-state spending and allows them to be sold to brokers.
Film-production companies set up as limited liability companies don’t owe corporate taxes in Louisiana. Most therefore sell their credits to someone that does. They are also allowed to sell them back to the state for 85 cents on the dollar.
That’s right: it’s not enough for Louisiana to let film and TV production companies eliminate their state tax liabilities; the state gives them “transferable” tax credits that can be sold on special markets to companies that do have tax liability, and if that fails the state will buy them back. So this is the corporate version of the “refundable tax credits” poor people get via the EITC.
This makes me kind of ill as an abstract matter, and gives a whole new meaning to the term “corporate welfare.” But it’s especially egregious in a state like Louisiana, with a horrendous budget shortfall, and even violates Jindal’s own principle that cutting back on refundable tax credits (e.g., credits from the business inventory tax) doesn’t violate his no-tax-increase pledge.
I’m not saying Bobby’s taking this inconsistent and politically damaging position strictly out of solicitude for Duck Dynasty; he’s slippery enough that there are usually multiple reasons for every objectionable thing he does. But on the other hand, when Mike Huckabee was going out of his way to pander to the Robertsons in his recent book, he didn’t have tax credits to hand them either, did he?
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, May 4, 2015
“Republicans Return To Tax Cut Fantasyland”: Every Argument Republicans Have Made In Last 20 Yrs About Taxes Have Been Wrong
One surprising thing about the campaign Mitt Romney ran in 2012 was that cutting taxes, a theme you might have expected from someone of his profile, wasn’t at the center of it. Perhaps wary of getting painted, even more than he already was, as the representative of the rich, Romney proposed a tax cut plan that was, by Republican standards anyway, rather modest. But those were the bad old days—tax-cut fever is back in the GOP, with a vengeance. From Bloomberg’s Richard Rubin:
The campaign for the Republican nomination for president is poised to become a race to the biggest tax cut.
More than a dozen candidates are vying for attention from donors and the party’s base voters, and they aren’t letting the U.S. budget deficit get in their way.
Senator Marco Rubio of Florida kicked off the competition with his plan to boost economic growth by slashing taxes on investments, wages and business income. Even the plan’s proponents concede it would reduce tax collections by at least $1.7 trillion in the first decade, largely favoring the top 1 percent of Americans over the middle class.
Senator Rand Paul of Kentucky says he will propose the biggest tax cut in U.S. history. Rick Perry and Rick Santorum, both considering repeat presidential campaigns, ran on reducing taxes four years ago and would be expected to do so again.
The shrinking deficit—it’s less than half of what it was four years ago—creates an opening for Republicans to return to the tax-cut politics that propelled Ronald Reagan and George W. Bush into the White House.
“It focuses on the right question at the right time, which is: How will we grow more rapidly?” Douglas Holtz-Eakin, a Republican and former director of the Congressional Budget Office, said of the proposal Rubio released last week with Senator Mike Lee of Utah. Holtz-Eakin acknowledged that the tax cuts require spending reductions to keep the deficit in check.
Holtz-Eakin is not just wrong about that, but wrong in two separate ways. First, how we grow more rapidly is not at all the right question. The question everyone is asking now is how we spread the gains of a growing economy more widely. And second, even if the question were how to grow more, tax cuts would not be the answer.
You have to admire one thing about the Republican perspective on this issue: their unflagging insistence, despite a mountain of evidence to the contrary, that the best and perhaps only way to affect the economy is by adjusting the tax rate paid by wealthy people. Here’s a quick history review of the last two decades: In 1993, Bill Clinton signed a budget that included tax increases. Republicans unanimously said it would bring a “job-killing recession.” It didn’t; in fact, almost 23 million jobs were created during Clinton’s two terms. Then George W. Bush got elected and signed two rounds of enormous tax cuts. Republicans promised these cuts would super-charge the economy. They didn’t; job growth was weak throughout Bush’s term. Then at the end of 2012, the deal ending the “fiscal cliff” allowed the top income tax rate to revert back to what it had been during the Clinton years. Republicans grumbled that this increase would hamper job growth. That didn’t happen either; in the two years since, the economy has created 5 million jobs.
In other words, the Republicans’ essential theory about upper income taxes—increasing them destroys jobs and smothers growth, while cutting them explodes growth and creates huge numbers of jobs—is not just wrong, but demonstrably, obviously, spectacularly wrong. Yet they keep saying it.
The reason isn’t all that difficult to concern. For conservatives, cutting upper-income taxes isn’t a practical imperative, it’s a moral imperative. It’s just the right thing to do. Taxes are an inherent moral evil, and taxes on those who have proved their industriousness and virtue by being rich are the most profound moral evil of all. This is a very different argument from the practical one, which says that if we cut taxes for the wealthy then good things will happen to everyone as a consequence.
Republicans know that the moral argument has appeal to only a very small number of Americans, mainly those would benefit directly from upper-income tax cuts. So the practical argument is the one they must offer, even if it happens to be utterly false.
So here’s the question they ought to be asked: “Every argument Republicans have made in the last 20 years about taxes has turned out to be wrong. Now you’re saying if we cut upper-income taxes, it will produce terrific growth. Why would that be true now when it hasn’t been true before?”
By: Paul Waldman, Senior Writer, The American Prospect, March 13, 2015
“A Contest Of Anti-Tax Purity”: The Fight For The Soul Of The Republican Party Is Over: The Rich Won Again
It was just eight months ago that a New York Times Magazine profile giddily described the rise of “a small band of reform conservatives, sometimes called reformicons, who believe the health of the G.O.P. hinges on jettisoning its age-old doctrine — orgiastic tax-cutting, the slashing of government programs, the championing of Wall Street — and using an altogether different vocabulary, backed by specific proposals, that will reconnect the party to middle-class and low-income voters.”
After the Republican Party had turned itself into a machine committed relentlessly to the singular goal of cutting taxes for the rich, the reformicons seemed to be poised to take control of the party’s intellectual apparatus.
The reformicons always assumed they could bypass Congress and focus all their attention on developing an innovative platform for a presidential candidate. (This was a shaky plan to begin with, as a prospective Republican president would need to sign something passed by Congress.) But as the Republican candidates have formulated their early platforms, the party’s center of gravity, rather than jettisoning its hoary policy of orgiastic tax-cutting, has instead continued and even deepened its fervor.
The Republican Party’s determination to cut taxes for the rich was never rooted in electoral calculation. (Indeed, this has always been a handicap for the party to overcome.) It arose from the fact that extremely powerful forces within the party, including but not limited to its funders, believed in it as a matter of ideology as well as self-interest. The plutocrats initially held back in the face of the reformicon movement, perhaps unaccustomed to facing any challenge within the party, which for decades has treated their doctrine as holy writ revealed to the world by Reagan himself.
They were never going to yield control of the party without a fight. The disintegration of campaign-finance restrictions has given the funding class greater leverage over the nomination, and as the presidential field has formed its domestic-policy platforms, its influence has been evident. Jeb Bush is wooing the fanatically anti-tax Club for Growth. Scott Walker has firmly allied himself with the party’s most unreconstructed supply-siders. Rand Paul is promising “the largest tax cut in American history.” Ted Cruz is, well, Ted Cruz. The Republican primary has turned into a contest of anti-tax purity. “We’ve got maybe an embarrassment of riches here in that we’ve never been able to support somebody before, and now we may get overwhelmed with people we think are worthy of support,” gloats recently departed Club for Growth president Chris Chocola.
Nowhere is the triumph of the supply-siders more evident than in the progress of Marco Rubio and Mike Lee. Rubio and Lee are the paradigmatic spokesmen for the reformicon platform — Lee as an ideas pitchman, Rubio as a candidate.
Last year, Rubio and Lee unveiled a tax-reform plan that their allies touted as a manifesto of reform conservatism, positioning the Republican Party on the side of hard-press working families rather than the rich. Lee’s plan “actually help[s] middle-class families rather than mostly cut taxes on the investor class,” gushed Ross Douthat, one of the most fervent and optimistic advocates of the reform-conservative faction.
Eventually, the Tax Policy Center crunched the numbers on Lee’s plan and found that it did nothing of the sort. Its provisions to benefit hard-pressed low-income workers turned out to be wildly oversold. Brookings economist Isabel Sawhill concluded, “very few if any low income families with children would benefit from the plan.” And, far from being the “tax reform” it claimed to be, Rubio and Lee had merely constructed a gigantic tax-cut plan that would reduce federal revenue by $2.4 trillion over a decade, a larger tax cut than George W. Bush passed in 2001. What’s more, the Lee-Rubio plan lavished far more benefits on the rich. The average earner in the lowest income quintile would save on average $79 a year, or 0.5 percent of her income, from the plan. An earner in the second-lowest quintile, the heart of the working class, would save $338 a year, or one percent of her income. The top one percent earner would see its income boosted by 2.8 percent on average, or more than $40,000 a year. The plan was simply a reprise of Bush-era debt-financed regressive tax cuts.
Reform conservatives took the setback in stride. Perhaps this was just an oversight or a mild computational error. Douthat hopefully suggested that Rubio and Lee would take a second pass at the issue and rectify the problem:
The liberal response to the Lee plan’s disappointing score, from Chait and others, has been to suggest that it illustrates the continuing unrealism of G.O.P. proposals. But notably, Lee himself didn’t respond by, say, denouncing TPC and insisting that some version of dynamic scoring would make the deficit numbers come out right; he responded by announcing that he was partnering with Marco Rubio (cough, 2016, cough) to develop a revised family-friendly proposal.
And, indeed, Rubio and Lee have come out with a revised version of their plan. But it didn’t get better. It got much, much, much worse. The new Rubio-Lee plan keeps most of its old structure, with its stingy treatment of low-income workers. It layers on top of that two changes: a far more generous treatment of business income, and a complete elimination of all taxes on capital gains and dividends. [Update: The plan would also, unbelievably, completely eliminate the tax on inherited estates, which for a married couple only begins to apply to inheritances above $10 million.] Both of these new features would lavish massive additional tax cuts on the rich, in addition to those already in the original version. The new Rubio-Lee plan would surpass anything George W. Bush or Mitt Romney ever proposed to do in its ambitions to relieve the richest Americans of their tax burdens.
Perhaps the fullest measure of the supply-siders’ triumph can be seen in the acquiescence of many of the reformicons themselves. Ramesh Ponnuru and Yuval Levin, both reform conservatives featured prominently in the Times story, responded to the new Lee-Rubio plan with fawning praise. James Pethokoukis, a reformist conservative, calls the plan “a big step toward persuading middle-income America that Republicans care about more than just the richest 1 percent.” (If this is a big step toward persuading America that Republicans care about more than the rich, what would the next step be? Legalizing servant-flogging?)
Perhaps the reform conservatives have capitulated completely in the name of party unity. Or maybe they were misunderstood from the beginning and never proposed to deviate in any substantive way from the traditional platform of massively regressive, debt-financed tax-cutting. Either way, the movement has, for now, accomplished less than nothing.
By: Jonathan Chait, Daily Intelligencer, New York Magazine, March 5, 2015
“This Isn’t The Debate Republicans Want To Have”: Republicans Befuddled By Obama Plan To Cut Middle-Class Taxes
Even President Obama’s most fervent opponents must acknowledge that he’s getting quite good at putting them on the defensive. Facing a Republican Congress and with only two years remaining in his presidency, he seems to come up with a new idea every couple of weeks to drive them up a wall. So he certainly wasn’t going to let the State of the Union address go by without using the opportunity — days of pre- and post-speech commentary, plus an audience in the tens of millions — to its utmost.
At Tuesday’s speech, Obama will announce a series of proposals meant to aid middle class and poor Americans and address inequality, most particularly an increase in the child care credit and a $500 tax credit for working couples (here’s the White House’s fact sheet on the proposals). To pay for it, investment and inheritance taxes on the wealthy would be increased and some loopholes that small numbers of the super-rich (like one Willard Romney) exploit will be closed. While the SOTU is often the occasion for dramatic announcements that are soon forgotten, this one lands in the center a debate that is looking like it will shape the upcoming presidential race. Naturally, Republicans are not pleased.
But if you listen carefully to what they’re saying, you’ll notice that they are barely mentioning the proposals for middle-class tax breaks which are supposed to be the whole purpose of this initiative; instead, all their focus is on the increases America’s noble job creators would have to endure in order to pay for it.
“Slapping American small businesses, savers and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs,” said Orrin Hatch. “More Washington tax hikes and spending is the same, old top-down approach we’ve come to expect from President Obama that hasn’t worked,” said John Boehner’s spokesperson. “This is not a serious proposal,” said Paul Ryan’s flak. “We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending.” For the record, a “flatter” tax system means either the poor paying more or the rich paying less, though Republicans never say which they prefer.
Marco Rubio was on the same page. “Raising taxes on people that are successful is not going to make people that are struggling more successful,” he said on Face the Nation. “The good news about free enterprise is that everyone can succeed without punishing anyone.” That was about as close as any Republican came to actually talking about the tax cuts Obama is proposing (though this National Review editorial does discuss them, by arguing that it’s an attack on motherhood). That’s probably because Republicans been in favor of ideas like them in the recent past.
While Obama does want to provide new funds to make community college free to anyone who wants it, most of his proposals in this round use the tax code to help people of modest means, which is exactly what Republicans usually suggest when they’re forced to come up with an idea to help the poor or middle class. Since they believe that government programs to help ordinary people are useless almost by definition, the only way to give anyone a hand is with a tax cut. And yes, the hand they usually extend is toward the wealthy, whose burdens are so crushing that justice demands that lawmakers not rest until they can be afforded relief. But tax cuts are so magical they can help anyone, which is why Republicans been in favor of expanding the Earned Income Tax Credit and the child care tax credit before.
But paying for it by increasing investment and inheritance taxes on the wealthy, like Obama is proposing? Not on your life.
One thing’s for sure: as the economy improves, both parties are now being forced to address the underlying issues of stagnant wages and inequality that have been an anchor around ordinary people’s lives for the last few decades. It’s fair to say this isn’t the debate Republicans want to have, and it’s easy to mock them for their insistence that they’re really the party with something to offer the middle class and the poor. But it’s a lot more productive to just take them at their word and see what they actually propose to do.
So Mitt Romney says he has cast off his previous contempt for those of modest means and now wants to focus his 2016 presidential campaign on the issue of poverty? All right — what are his ideas? If they’re actually worthwhile, he should get whatever credit he’s due. If it’s more trickle-down policies and stern lectures about bootstrap-pulling, then we’ll know nothing has changed.
You can argue — and many will — that it’s pointless for Obama to introduce significant policy proposals like this when he knows they couldn’t make it through the Republican Congress. But what alternative does he have? He could suggest only Republican ideas, but he wouldn’t be much of a Democratic president if he did that. Or he could offer nothing at all, and then everyone would criticize him for giving up on achieving anything in his last two years. If nothing else, putting these proposals forward can start a discussion that might bear legislative fruit later on. Major policy changes sometimes take years to accomplish, so it’s never too early to start. And if Republicans have better ideas, let’s hear them.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line, The Washington Post, January 19, 2015
“A Massively Failed Experiment”: Why Conservatives Learned Nothing From Sam Brownback’s Failure
Kansas governor Sam Brownback had a plan when he got elected in 2010, and it was a plan that could only be enacted in a place like Kansas: Pass huge tax cuts, then watch the state transform into a kind of economic heaven on earth. Brownback surely could never have doubted it would work, since he and those in his party have been saying for decades that tax cuts deliver economic growth, rising tax revenues, general happiness, and shinier, more manageable hair.
You’ve probably heard the story: growth in Kansas did not, in fact, explode, but what did happen is that revenues plummeted, leading to severe cutbacks in education and other state services. Brownback nevertheless managed to get re-elected, because it was a non-presidential year and because it’s Kansas. So now he’s had a chance to reflect, and here’s how he’s looking at things, according to a Topeka newspaper:
As Gov. Sam Brownback’s first term comes to a close, the Republican governor has one regret — no, scratch that — one thing he would do differently.
“I probably would have chosen words better at different times, because you go through a campaign where you’ve got to eat the words you inartfully said,” Brownback said during a recent interview with The Topeka Capital-Journal.
The former U.S. senator — with the help of a Republican-controlled Legislature — slashed taxes, privatized portions of state government and pursued a staunchly conservative policy agenda during the past four years. And then Brownback fought off a competitive challenge from Democratic Rep. Paul Davis.
Atop the list of words and phrases that have proven controversial and given his opponents the greatest opportunity for mockery: predicting the Kansas tax cuts would act as a “shot of adrenaline” to the state’s economy and referring to the plan as an “experiment.”
In other words…
It’s obvious that he regrets calling it an “experiment” for no reason other than that word showed up in a bunch of Democratic attack ads. But as for the idea that tax cuts would give the Kansas economy a “shot of adrenaline”? Of course that’s what he said, because that’s what he believed. If you don’t believe that, you can’t call yourself a Republican.
It isn’t that there’s no truth to it—all else being equal, tax cuts put more money in people’s hands, so they can spend more, which will have some positive impact on the overall economy. The problem is that 1) the effect is never as large as Republicans expect it to be; 2) not only did Brownback’s tax cuts go mostly to the wealthy, who are less likely to spend the money, he actually raised taxes on poor people (there’s an explanation here), and 3) the benefits were swamped by the harm created by the inevitable cratering of state revenue.
But if you’re Sam Brownback, how do you account for such an outcome? It can’t possibly be that the theory on which the entirety of contemporary Republican economic policy rests is false. What’s he going to say—”It turns out that tax cuts don’t do much good”? Not in this universe.
It’s not just him. The failure of Brownback’s experiment may provide an effective rhetorical tool liberals can use against conservatives in economic debates, but it won’t actually change any conservatives’ thinking. The reason is that their belief in tax cuts doesn’t rest on the practical effects. That’s an argument that’s meant to appeal to everyone, since it concerns something (growth) that just about everyone thinks is good. But the real source of the conservative support for tax cuts is moral, not practical. They believe that taxes are inherently immoral — the government stealing from you the fruits of your labor (or inheritance or wise investments, as the case may be) to enact its nefarious schemes. Taxes should therefore be as low as possible. Conservatives also tend to believe that progressive taxation is doubly immoral, since it takes more from the most virtuous among us.
So my guess is that Brownback sees his experiment as a practical failure but a moral success, and other conservatives would agree. Not that he’d say so in quite those terms, because he knows how it would sound. But the only lesson he’s learned from his failure is to change the words he uses.
By: Paul Waldman, Contributing Editor, The American Prospect, December 23, 2014
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