Jun 25 2009, 12:28PM
The Biggest Tax In American History?
There's plenty of stuff worth quibbling over in this big Wall Street Journal editorial on climate change and the Waxman-Markey bill, and some decent food for thought. Then I arrived at the last paragraph and saw this:
Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history.
So here's what I'm wondering: Is there any possible, conceivable way this statement can be true? I mean the question seriously. Did the Wall Street Journal editorial board have a meeting where someone tossed out this idea and the consensus was that it could pass a test of common sense? Is it true under some definition of "biggest," or some bold interpretation of "likely," or some novel notion of "American history"?
As far as I can tell, it's not even true by the Journal's own cost estimate of the bill in question. They write:
When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.
Would this be the biggest tax in American history? I'll humor it. Let's assume the Heritage analysis is completely accurate. Let's further assume that the $6,800 cost per family will occur tomorrow and not 26 years in the future, so we don't have to worry about inflation or any complicated present-value comparison stuff. Let's also not worry about adjusting for the economic cost of climate change. And let's assume that this comparison should just be with the face value of other taxes and not broad comparisons of the economy "with and without" the tax. Heck, let's also compare this cost to the "family of four" with the average individual cost of other taxes.
Now let's compare "the biggest tax in American history" to the most obvious and widely known tax in America: The income tax. The average individual income tax return is larger. In 2006 it was a little over $7,500. Is there any reason why that sentence from the Journal isn't just a large, obvious factual error?
As far as I can tell, it's not even true by the Journal's own cost estimate of the bill in question.
Is there any reason why that sentence from you isn't just a large, obvious factual error? No, there isn't. The WSJ quoted Heritage Foundation's study, but didn't adopt it as its own.
The Journal editorial listed scare factors that it believes will prove the CBO estimate low. If those factors materialize, it concludes, this will be the largest tax in history. The Heritage study was just one data point showing the CBO estimate is low.
You may disagree, but at least the WSJ showed some enterprise by looking beyond the CBO estimate, which you failed to do in your earlier posts. A more fruitful approach is to debate the WSJ editorial on its details, instead of skipping right to the last sentence and arguing over hyperbole.
When debating your ideological opponents, as you attempt to here, you should try to read them for what they mean and not get into a silly semantics argument. Even if your mistake wasn’t (i.e., the WSJ’s “own” numbers matched the Heritage’s), the numbers indicate the largest tax increase in history. That more important and more worth examining than latching onto a sloppy conclusory sentence.
So Clarke reading a logical extension out of the WSJ's argument is sloppy, but you restating the WSJ's position from 'the biggest tax in American history" to the 'largest tax increase in history' isn't? They mean two, completely different things, and the Journal never suggested they meant the second. They meant The. Largest. Tax. Ever. And it isn't.
I mean, come on. The Journal is using scare tactics, as you say. It's using estimates beyond the CBO, stated factors that may or may not materialize, and then suggesting that they will all add up, as if by magic to a tax greater than any other tax we've ever levied. That's pretty ballsy, and hugely anti-intellectual. The burden of proof is on them, if they think they can actually prove it.
Yeah, the WSJ editorial is weak and sloppy, but I think Conor's response was too. The difference is that I expect weak slop from the WSJ Ed piece (their Op-Eds are better), but I expect more out of our host here. That's why I'm disappointed.
When confronted by something like the WSJ ed, its best to play the mature adult and instead of hanging a post on a ridiculous single statement (and one that was probably just a typo) say something like, "Although they say Biggest Tax, they probably mean Biggest Tax Increase, so let's knock down the reasons they think it'll be so expensive (kinda like you just did).
For what its worth, Warren Buffet, John Dingell and other non GOP types think its a big tax, too. The CBO estimates also contain some hard to believe assumptions, that make its numbers suspect.
Gosh, in it's own way I find this sort of flattering. I'm glad you expect more from me than from the Wall Street Journal!
That said, even if it's just a typo, it's (1) a pretty important typo; (2) a typo they haven't corrected; and (3) a typo in what was a "most emailed article of the day" (which is how it popped into my RSS reader).
Conor
I think its just sloppy usage. By "biggest tax ever", they probably mean "biggest tax increase ever".
The CBO estimate ($175 per family) makes no sense to me. The average car is driven something like 12,000 miles a year. A 25 mpg, this is 480 gallons of gas. If they want people out of their SUVs and into a Prius, they have to be talking at least $1/gallon increase in gas prices. This is a $480 hit per year per car.
With the average family having more than one car, we have to be talking far more than $175 tax. Either that, or the permits are so loose to start with that they have no effect on gas prices. $175 would be a 36 cent increase in price, even assuming only 1 car per family.
The CBO estimate is intentionally incomplete -
---
The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."
http://online.wsj.com/article/SB124588837560750781.html
I have major issues with this legislation:
(1) Every organization that tries to estimate the costs of this bill comes up with different numbers, part of which is probably due to different parameters in use while calculating the estimate. Estimates need to be somehow put into the continuum of probability and cynicism in order to accurately gauge costs.
(2) I have to go easy on these estimators. This bill has been in play for about a month, and is 1200+ pages in length. How in the world could anybody sort through that much data and come up with a good answer? The only way is "by working way too fast" and, for myself, when I do that, the answer is usually wrong.
(3) In no discussion have I heard about repercussions of raising the costs of doing business for American companies and the impact of this on American households who buy from them. I remember about 8 months ago when gas prices skyrocketed and all of a sudden, and those prices were immediately passed on to the consumer by raising the cost of products and services. It very well may be that the tax burden upon an American household in 2020 id less than the cost of a postage stamp per day... sure. The real question is, what is the cost to American businesses and how much of that cost are their customers going to shoulder? My guess: most of it, if not all.
Conclusion: This bill seems incredibly poorly thought-out and too complicated to accurately estimate its effects, especially in a month. More time is required to accurately judge; we've put it off for 20 years so far, a couple more months aren't going to kill anybody. I truly hope that this bill crashes and burns as it so richly deserves, if it votes soon.
Postscript disclaimer: I know nothing about standard procedure on the Beltway, nor have I read the bill in its entirety. My opinions are gathered from watching PBS (only) news, and reading various opinions from editorials in publications like WSJ and The Atlantic. If I've said anything offensively stupid, I'm not sorry but do hope that someone will correct me!
I think all of these concerns are real, but I also think they're not unique to this piece of legislation! There is big empirical disagreement over just about every piece of big legislation, isn't there? This situation might be worse because there's disagreement over the underlying science, but I think we're talking degree, not kind.
# 1 is to some extent the least troubling for me. All of the estimates done by people who do estimates for a living -- ie the EPA and the CBO and not, say, the Heritage Foundation -- come up with figures that are in the same ballpark. More importantly, they come up with numbers that are palatable, at least to me.
Conor
Conor,
Thanks for taking the time to reply. I agree wholeheartedly with you that my concerns aren't unique to this piece of legislation, but this was an awesome illustration, to me, of what is systemically wrong with our method of legislation. Just because every "car" rolling off of our legislative assembly line starts an electrical fire within 100 miles doesn't mean the cars are supposed to do that. I understand that there's no simple and easy way to address the way that Washington makes laws, but if we sheeple just lay down and take it as status quo, it makes the work much easier for those legislators who would so like to run slipshod over us.
I honestly don't care how good the cost estimators are; the obvious logic to me is that the simpler and more straight-forward a piece of legislation is, the easier it will be to predict its costs. Conversely, the more words there are in a piece of legislation, the more ways there are to interpret it, and therefore the more it will be subject to interpretation by judges and by inter-governmental agencies.
Fundamentally, I disagree with any cap-and-trade system, because the largest corporations are going to make and find a way to monopolize that market too. There may be a little competition in the market early on, but that particular cat-and-mouse game between top sellers and regulators seems too easy for business to win by flooding the market with more capital than anybody can compete with.
Thanks again for taking the time, Conor. I'm not sure what it is about the nature of celebrity, but it's always immensely gratifying for a "bona fide" smart person (you write for the Atlantic, right?) to agree with me. :)