Sunday, March 17, 2013

Another Silly NYT Editorial

One can always count on the New York Times editorial board for misleading commentary on matters budgetary.  Here is their latest installment. 

First, we have the customary dipsy doodle on tax expenditures, as if they were actual expenditures
Tax breaks work like spending. Giving a deduction for certain activities, like homeownership or retirement savings, is the same as writing a government check to subsidize those activities. Functionally, they mimic entitlements. Like Medicare, Medicaid and Social Security, they are available, year in and year out, in full, to all who qualify. Yet in budget talks, Republicans ignore tax entitlements, which flow mostly to high-income taxpayers, while pushing to cut Medicare, Medicaid and Social Security.
Giving a deduction is not the same as writing a government check unless one posits that the taxes necessary to write the check would come only from the person who received the deduction.  The fact that you can structure two things to accomplish the same task does not mean they are the same thing.  To take a very trivial example, I can use sunlight or burn natural gas to heat a substance but that does not mean that they are the same thing.

In accounting terms it's the difference between a counter (or contra) credit and a debit.  Although they have the same effect on net worth, they are not the same thing.  But this is the norm for those who favor higher taxes.  If we can equate higher taxes with lower spending, maybe we can confuse the masses enough to get what we want.

But that part is normal for the Times editorial board and is really an irreconcilable difference of opinion.  What's more annoying is the juxtaposition of two things.  First, we have a general description of the size and scope of tax expenditures.

Each year, the government doles out tax breaks worth $1.1 trillion. That is more than the cost of Medicare and Medicaid combined. It is more than Social Security. It tops the defense budget, and it tops the budget for nondefense discretionary programs, which include most everything else.
To get to the $1.1 trillion, one needs to include personal and corporate tax breaks, envision a tax code where capital income is taxes like wage income (which has never happened but maybe should).  The comparisons are an example Medicare and Social Security taken together are larger than $1.1 trillion per yer and yet the Times ignores that comparison. 

But the editors follow this up with three examples of tax expenditures: Carried Interest, Nine Figure IRAs, and Like Kind Exchanges.  Of these three, the Times says carried interest costs the Treasury $13.4 over a decade or $1.3 billion per year.  Otherwise know as 0.1% of total tax expenditures.  Like Kind Exchanges cost the government $3 billion a year (or 0.3%) though the editors claim "...the amount could be much higher."  As for nine figure IRAs, the Times only says "[n]o one knows how much tax is avoided this way."

So to review, equate tax increases with spending reductions, quote a really big number to establish how important this is and then cite specific examples that account for less than 0.5% of the number.  I do wonder sometimes how things like this make their way into one of the nation's leading newspapers.

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