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Really Doug?

November 15, 2011 - John Stack
The latest Op-Ed piece from Doug Hoffman (ADE nov 9) really gets us nowhere, and brings up nothing new. It’s the republican mantra – as it has been for over 40 years. Other than a couple recent statistics, it’s the same playbook from 1970, 1980, 1995 etc etc.. I’ve been looking up logical fallacies recently more often (because I unfortunately take my opinions to my friends Facebook pages). In the year leading up to the next big election, it seems like politicians spend more of their time in exploiting logical fallacies.

The most famous fallacy was of course the argument made in ‘The Search for the Holy Grail’ where by using the fallacial argument of ‘Affirming the consequent’ a woman was convicted of being a witch because she weighed the same as a duck. Even the accused admitted ‘It’s a fair cop’. Today, the same type of arguments are still used to make claims that themselves don’t’ hold water.

Right off the bat, Hoffman jumps to claiming that the ONLY reason that politicians look at the wealthy to solve their tax problems is because it ‘it will result in votes’. This argument is squashed by a number of illogical fallacies (straw man and fallacy of the single cause off the top of my head). I would quote Willie Sutton as to why many people look to the wealthy ‘because that’s where the money is’.

The second two paragraphs purport to back of the claim that lower taxes lead to higher revenues (correlation does not causation) or that the lower tax rates caused the more rich to pay more of the tax pie. It does show that the highest earners did make more money as compared to those less rich than in the prior years (it doesn’t show what happened to overall revenue – ie – if real wages dropped for the other 99%, of course they would pay less of the total). This shows nothing, as it applies to the doctrine of taxing/or not taxing the rich. What happened when we cut taxes as the amount of revenue collected vs times when we raised taxes? Well, in the last 30 years, revenue has increased all but 3 years. Ironically, those 3 years all corresponded to tax cut years… Again, I won’t claim a causality because we almost always get more revenue and higher GDP regardless of tax cuts or tax increases.

Doug goes on to claim that most of the deductions, credits and other tax incentives phase out at low levels. True, but he’s using statistics incorrectly. In Saranac Lake, most homeowners have a STAR exemption. Many have veterans exemption, and other such tax exemptions. They probably add up to a thousand or more. But, the one single exemption on Saranac High school is worth more than all these little exemptions combined. If it were true, then the rich would almost always have effective taxation rates pretty close to the marginal tax rates. Just look at Warren Buffet. The second richest man in America pays less of a percent of his income than his secretary. How could this be Doug if all these income exemptions phase out at low levels? The amount of tax abatement Buffet gets is equal to about what a million of the lesser taxpayers exempt cumulatively.

Next Mr Hoffman goes off on a slippery slope argument followed by a redistribution of wealth argument. On the slippery slope, he claims we can seemingly continue to tax the rich more and more and more. But this ignores that tax rates have been steadily coming DOWN. Using his own slippery slope complaint, you could say we should keep lowering the marginal tax rate to zero, or even negative (credits). The slippery slope argument has to work both ways Doug. Secondly, the term ‘redistribution of wealth’ does not only apply to the poor. Every single change in taxation is a redistribution of wealth in some way. A farm subsidy redistributes wealth to farmers. Lower tax rates on rich redistributes wealth to the rich. Lower taxes on poor redistribute taxes to the poor. Seems as if the only good redistribution of wealth is one where the poor get less and the rich get more.

He goes on to spout the old lowering taxes on the rich causes them to invest more (poor people don’t invest) - their investment causes more jobs, blah blah blah. He asserts this (seemingly an argument of repetition) with no evidence. Truly though, those with less money tend to spend their newfound money much more so than the rich. Currently, banks are making record profits, but they are not making more loans or putting money back into the economy because of their uncertainty of the market and the economy, not because they don’t have enough money. Most recessions are not solved by tax policy, but by consumer confidence. The more confident the consumer is in spending their money, and not hoarding it because they expect to be laid off or suffer some other economic problem, causes companies to restart their production lines and start selling these commodities. GM and Toyota aren’t going to sell more cars and trucks because they make more cars and trucks- they are going to sell more cars and trucks because people will want to buy more cars and trucks (which would be the cause of the companies building more cars and trucks, not the other way around).

Finally, Doug hits on the mother of GOP talking point misinformation. He claims that a flat tax will cause those with more money to not have a disincentive to make more money (Ie- the more money you make, the more money, marginally, you pay in taxes up to a point). Warren Buffet himself dismissed this. When Buffet saw an opportunity to make money, he took it. He didn’t wonder ‘Oh, will this cause me to pay more in taxes?’. He saw he would MAKE MORE MONEY and invested. No one looks at their marginal tax rates to decide if they will invest. Plus, at a certain point the marginal change in tax rate becomes infitessimally small making the progressive tax rate near moot for them.

Mr Hoffman, before you run again, please update your 1965 pamphlet ‘GOP Tax Policy Talking Points for Dummies’. Mr Hoffman claims to justshow ‘true hard facts and reality’…Well, as any therapist can tell you, everybody’s reality is within their own heads. Most of what’s in Mr Hoffman’s reality doesn’t match up with the accepted reality of normal economic debate…


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