The Dean Tax

No matter who wins the presidency this coming November, one legacy of the 2004 election is likely to be the shrewd and effective internet-based campaign techniques used by the Dean camp. Love ’em or hate ’em, it’s tough to argue with the way they’ve taken the digital domain by the horns.

Now the Dean campaign has a new kid on the block: BushTax.com. Many Dean supporters refer to it as gospel on how the Bush administration has covertly taxed every “working family” so some vaguely defined uber-wealthy jet-setter can snidely crush them under the wheels of the obligatory gold-plated Hummer.

I find it interesting that a Google search for links to BushTax.com turns up no rebuttal to this web site yet. So perhaps it’s time to take a look at it with a skeptical eye. BushTax.com starts out with a sweeping overview of the problem:

Rather than take responsibility for our common future, Bush has shifted costs to states and communities, who then pass them on to you.

Shifted costs from where? If these costs were previously borne by the Federal government, they weren’t paid for by the tooth fairy. They were paid for by the taxpayers. What does it matter whether they are funded via Federal or state government? And if you have to pay $1,000 in tax, wouldn’t it be better to pay it to your state or city instead of the IRS? At least that way, you’d know taxes are being spent where they are collected.

Across the country, people are seeing their property taxes skyrocket.

Yes, because states lack the backbone to cut spending, as I previously noted. That’s part of the reason California adopted Proposition 13 a quarter of a century ago. The fact of the matter is that revenues saw a huge spike in the late 90’s due to capital gains tax from the stock market bubble. When revenues declined, spending did not. According to the Congressional Budget Office:

Individual income tax receipts from capital gains realizations normally make up about 4 percent to 7 percent of individual income tax revenues (see Table 1); they are usually between 2 percent and 3 percent of total receipts.

Table 1 of the CBO document shows that capital gains made up 8 percent of tax revenue in 1996. The next year it was 10 percent. Then 11. In 2000 it reached 12 percent. The CBO analysis even goes so far as to reiterate this point later on:

Largely because of the stock market boom of the 1990s, gains rose as a percentage of individual income tax receipts from about 7 percent in each year in the first half of the decade to about 12 percent in 2000.

Now let’s go back to BushTax.com:

State college tuition at 4-year schools has increased this year by an average of $579 nationwide.

The College Board study referenced by BushTax.com also indicates that tuition rose at the same rate for four-year private colleges while President Clinton was in office. It also shows public four-year college tuition increased by about 50%. Once room and board are included, that four-year private college cost skyrocketed from $14,188 in 1992 to $22,401 when President Bush was inaugurated.

Should we call that the “Clinton Tax”?

The fact is that college tuition has been on the rise for a long time. The College Board study also points out that financial aid has been on the rise, and covers a larger portion of tuition now than ever before. For those at two-year colleges, “grant aid covers the entire tuition amount.”

The next claim from BushTax.com:

Half a million children have been deprived of health coverage.

According to the Office of Management and Budget (Analytical Perspectives, Budget of the United States Government, Fiscal Year 2003. Table 15-3, p. 297), State Children’s Health Insurance Program funding is projected to increase from $3.2 billion in 2004 to $5 billion in 2007, a 56% increase.

Bush is largely to blame for the fiscal crisis that has forced states and communities to raise taxes and slash services. According to the non-partisan Center on Budget and Policy Priorities, ?A conservative estimate suggests that federal policies are costing states and localities about $185 billion over the four-year course of the state fiscal crisis.? Bush has shifted health costs to states and failed to own up to his responsibility to pay for homeland security, election reform, and No Child Left Behind. As a result, states and communities have had no choice but to raise taxes and cut services. That?s the Bush Tax.

First of all, it appears that the Center for Budget and Policy Priorities (BushTax.com’s most frequently quoted source) may not exactly be non-partisan. Nevertheless, this is more of the same argument: “States were forced to cut services because the Federal government doesn’t have the money to give them.” This has little to do with the Bush administration. It’s a failing of state governments to adhere to even the slightest semblance of fiscal responsibility.

The Cato Institute’s 1999 state spending analysis said:

As record tax revenues have poured into state coffers, state government expenditures have soared. In an era of almost no inflation, state budgets grew by 4.5 percent in 1996, 5 percent in 1997, and nearly 6 percent in 1998. Four states (Vermont, Florida, Nevada, and South Dakota) actually raised their spending by 10 percent or more in 1998. The states now spend roughly $600 (adjusted for inflation) more per person than they did in 1990. Seven states have permitted their budgets to mushroom by more than 30 percent after adjusting for population growth and inflation: Mississippi, Oregon, Arkansas, West Virginia, Texas, Missouri, and New Hampshire.

The next paragraph sagely predicts the current state budget crises (keep in mind this was written in May of 1999):

Unless states begin to cap expenditure growth and cut taxes to reduce the revenue intake of state governments, they may be faced at the end of this expansion with the same massive deficits that created tidal waves of red ink when the 1980s boom ended.

Let’s return to BushTax.com:

Our children and grandchildren will be paying the Bush Tax. Bush promised, “I came to this office to solve problems and not pass them on to future presidents and future generations.” Yet as a direct consequence of his tax policy, over six years an American family of four will take on $52,000 more in its share of the national debt. That?s the Bush Tax.

I will agree with Dean & Co. on this issue–to a point. Yes, the national debt is rising. I believe spending should be cut drastically. But some deficit spending is to be expected in the current environment. The wars in Afghanistan and Iraq are expensive, as are relief funding for victims, rebuilding in New York, pouring money into intelligence resources, establishing a new cabinet department, increasing border security and customs manpower, and so on.

So do the Bush tax cuts really amount to a tax increase on the Average Joe? I don’t think so. The Annenberg Public Policy Center at the University of Pennsylvania doesn’t, either. Their FactCheck.org site says:

Howard Dean is firmly on the record in favor of repealing both tax-cut bills signed by President Bush in 2001 and 2003, and returning to tax rates that prevailed under Bill Clinton.

That would do more than just canceling some scheduled tax cuts that haven’t yet taken effect — it would clearly require raising taxes from where they are today. The table below, from the nonpartisan Tax Policy Institute, calculates how the Bush cuts are affecting families in various situations for the current tax year. Clearly the affluent gain most, just as they currently pay the most taxes. But a total repeal of the Bush tax cuts would also cost $350 for a single taxpayer making as little as $15,000 a year. And for a typical middle-income family making $50,000 a year, with two children under age 17 qualifying for sweetened per-child tax credits, total repeal would amount to a tax increase of $1,773.

The thing that really cracks me up about BushTax.com is the last paragraph of the page. This is where Governor Dean offers up his solution to the problem:

As President, Howard Dean will repeal the Bush Tax. He will provide genuine relief to the states through his Fund to Restore America and restore sound fiscal management of the nation’s finances.

So his plan is to provide relief (aka “money”) to states from a new Fund. Where is this money going to come from? Unless it’s going to grow on trees, I think you know the answer to that one. In the final analysis, Governor Dean’s answer to the Bush Tax is…. a tax. The Dean Tax.

Stephen Moore’s recent Wall Street Journal editorial analyzes the Dean revenue plan and finds that the Governor’s proposal would

… raise taxes on 109 million Americans by roughly $1.5 trillion over the next 10 years. This comes out to a Dean tax of about $15,440 for every family of four in the U.S. over the next decade. The Dean tax rule of thumb is that if you are in the middle class, he would roughly double your federal income tax payments.

That’s the Dean Tax.

During his decade-long run as governor of Vermont, the corporate tax, sales tax, cigarette tax, and gas taxes went up considerably.

That’s the Dean Tax.

Governor Dean wants to bring “universal health care” to every American just as he did in Vermont. The Heartland Institute notes that Vermont’s

… spending on Medicaid has risen from $86.7 million to $263.5 million. According to Census Bureau figures, the state?s uninsurance rate has gone from 9.5 percent (1992) to 9.7 percent (averaged over 1999-2001). In 1994–before Medicaid expansion–Vermont?s uninsurance rate was second lowest among the states. By 2001, Vermont had fallen to 10th place.

That’s the Dean Tax.

Only time will tell if the “Bush Tax” idea proffered by the Dean campaign will stick. I have a feeling it won’t–the technique is a bit transparent. BushTax.com is probably better suited for keeping the Dean supporters energized than it is for rallying clear-thinking undecided voters to the cause.