Wednesday, February 02, 2011

Grading PolitiFact: Mark Warner & the tax break crisis

The nation is hemorrhaging cash in the form of tax breaks, according to Democrat Mark Warner.  Something tells me I'm about to shadow one of the dumbest fact checks of all time.

The issue:

The fact checkers:

Warren Fiske:  writer, researcher
Daniel Finnegan:  editor


Sen. Warner's statement on Fox News was reasonable and unremarkable, on balance.  See for yourself:

PolitiFact zeroed in on the goofiest part:
"I don’t think that most Americans realize that we actually spend more on tax expenditures, or tax breaks, than we collect in personal income taxes each year," he said. "So that has to be on the table, also."
Why do I say it's goofy?
1)  A tax break is not an expenditure any more than the discount value of a retail coupon is a business expenditure.
2)  Any distinction between taxes stipulated by law and those legitimately not paid according to the same law is ultimately artificial (a business, for example, can issue a $2 coupon while raising the price $2 at the same time).
3)  In accord with point No. 2 above, Warner's conclusion that tax breaks need to be on the table is a non starter.

PolitiFact unaccountably treats Wanner's statement with perfect seriousness:
Personal incomes taxes are the federal government’s largest revenue source, providing 45 percent of its tax receipts. Is Uncle Sam exempting more than he’s taking in? We checked.
Why check?  We can count a 15 percent tax on $20,000 of income as an 85 percent exemption if we want.  None of it really means anything, and by itself does nothing to justify looking at removing existing tax breaks.

Wouldn't that explanation best serve PolitiFact's readers?

Apparently PolitiFact doesn't agree:
(W)e untangled the numbers. Computing data in a Dec. 21 report by the Joint Committee on Taxation, we found that individuals receive about 91 percent of the value of income tax breaks, with corporations getting the rest.

That means during the last two fiscal years, individuals received a total of about $1.98 trillion in breaks for the $1.85 trillion in income tax they paid. Warner’s claim, in other words, holds true when compare you the income tax paid by individuals to the tax breaks they receive.
 Heh.  Suckers.

Now watch as PolitiFact concedes the point I made above without apparently realizing it:
Under the commission’s proposal, individuals would be compensated for some of the loss in tax breaks by lowering the rates charged in all income tax brackets.
Exactly!  Just like raising the price of a mattress 10 percent to make up for the customer's coupon entitling him to 10 percent off.  There's no need to mess with the coupon at all.  Warner's rhetoric suggests that the coupon needs to be adjusted to a mere 8 percent off or something like that.  It's ridiculous.  Raising the price of the mattress works just as well as adjusting the discount on the coupon.

What neither PolitiFact nor Warner bother to explain is the parallel economic effect.  Most tax breaks exist for a reason other than to reduce federal revenues.  Like a factory coupon, they exist to encourage some type of economic activity.

I respect the overall aim of Sen. Warner's committee, but his reasoning on this particular point is specious, and PolitiFact ought to have done something to point out how ridiculous it is.  Before considering the removal of any tax break one needs to consider the reasoning behind the tax break.  It's foolish to treat the tax break itself as an expenditure and nothing more.

PolitiFact rated Warner "True."  It was a pointless exercise.  It was like trying to confirm whether or not a desert wanderer perceives a mirage.  Even if the mirage is confirmed it won't make it real.

The grades:

Warren Fiske:  F
Daniel Finnegan:  F

Fiske gets some props for his dogged determination in tracking down pointless data and playing the obligatory mathematical games with it.  But he's still a sucker at the end of the day.

Everyone associated with the editorial decision to rate this claim can share in the criticism.

Warner spouted malarkey and PolitiFact couldn't figure it out.

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