Harry Potter and the Welfare State

In the feverish run-up to the May general elections in the United Kingdom, J.K. Rowling, billionaire author of the Harry Potter series, has published a truly wonderful op-ed in the Times of London about her experience as a struggling single mother and the support she received from the state. The sentiment is particularly relevant in the US today, on Tax Day, when everyone seems to think they pay the government too much.

Rowling, with her massive fortune, pays far more in taxes living in the UK than she would if she decamped to, say, Monaco. But she didn’t, and won’t. To wit:

I chose to remain a domiciled taxpayer for a couple of reasons. The main one was that I wanted my children to grow up where I grew up, to have proper roots in a culture as old and magnificent as Britain’s; to be citizens, with everything that implies, of a real country, not free-floating ex-pats, living in the limbo of some tax haven and associating only with the children of similarly greedy tax exiles.

A second reason, however, was that I am indebted to the British welfare state; the very one that Mr Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism.

Food for thought for all those hard-working rich people thinking of “going Galt.”

“47 Percent”

David Leonhardt, with characteristic clarity, gives much-needed context to the misleading statement that 47 percent of American households don’t pay any taxes:

The 47 percent number is not wrong. The stimulus programs of the last two years — the first one signed by President George W. Bush, the second and larger one by President Obama — have increased the number of households that receive enough of a tax credit to wipe out their federal income tax liability.

But the modifiers here — federal and income — are important. Income taxes aren’t the only kind of federal taxes that people pay. There are also payroll taxes and capital gains taxes, among others. And, of course, people pay state and local taxes, too.

Even if the discussion is restricted to federal taxes (for which the statistics are better), a vast majority of households end up paying federal taxes. Congressional Budget Office data suggests that, at most, about 10 percent of all households pay no net federal taxes. The number 10 is obviously a lot smaller than 47.

All good stuff, but what I find more interesting is this: let’s say it was true that nearly half of American households don’t pay any income taxes, as many on the right would have you believe. It’s a proveable fact that our system of taxation is not actually all that progressive (although those same right-wingers would never admit this either). Given that, shouldn’t the really troubling aspect of the 47 percent figure be the sky-high-and-rising level of income inequality necessary for such a case even to be possible?

Paul Ryan Will Not Balance The Budget

Not only will Republican budget guru Paul Ryan’s proposed budget raise taxes on almost everyone, it will also not balance the budget — the one thing it was designed to do!

Here’s the problem. That Congressional Budget Office score that Ryan cites as proof? It doesn’t estimate how much revenue his plan would bring in based on his new tax regime. Because the CBO never scores changes to tax policy — that’s the job of the Joint Committee on Taxation — its score was based on a revenue number (19% of GDP) that came from…where? Oh, right: Paul Ryan. Where did he get that number? He made it up.

The Tax Policy Center, on the other hand, did score Ryan’s tax proposals. Would you be surprised if I told you Ryan’s figures are a steaming pile of bullshit? I didn’t think so:

Just for kicks, here’s the relevant portion of the Center for Budget and Policy Priorities’ takedown of the whole ugly thing:

Assertions that the Ryan plan is fiscally responsible rest on a serious misunderstanding of a Congressional Budget Office (CBO) analysis of the plan. CBO only partially analyzed the Ryan plan. Contrary to some media reports, CBO has not prepared an actual cost estimate of it. CBO generally does not produce estimates of the effects of proposed changes in tax policies; that is the responsibility of the Joint Committee on Taxation. In its analysis of the Ryan plan, CBO did not attempt to measure the revenue losses that Rep. Ryan’s proposals would generate.

Instead, as its report states, CBO simply used an assumption specified by Rep. Ryan’s staff that the overall level of revenues would remain unchanged from what the federal government would collect through 2030 under current policies, and would equal 19 percent of GDP in later years. CBO did not find that the Ryan plan actually would achieve these assumed revenue levels. (For commentary by Howard Gleckman of the Tax Policy Center on the widespread misunderstanding of the CBO analysis, see here.)

The reality is different; TPC finds that the Ryan plan would result in very large revenue losses relative to current policies. TPC estimates that even with its middle-class tax increases, the plan would reduce federal revenues to 16 percent of GDP in 2014. Because the tax cuts for the wealthy would dwarf the tax increases for the middle class, the Ryan plan would allow the federal debt to continue growing for a number of decades to come, despite its steep cuts in Medicare, Medicaid, and Social Security.

Disappointing, but not surprising. Honest Republicans are, after all, an endangered species.

Paul Ryan Wants To Raise Your Taxes

Last month, during a little back-and-forth with a commenter, I conceded that although I completely disagree with it, Paul Ryan’s budget “roadmap” is serious and in good faith (unlike most recent GOP “plans” for major issues).

What I didn’t know at the time was that if you run the numbers, as the Center for Tax Justice has, it turns out that Ryan’s plan has the unique effect of reducing government revenue while raising taxes on the bottom NINETY (90) PERCENT of Americans. (It also, of course, violently cuts programs and services.) I could have sworn Republicans were for lower taxes!

(I’ll note here that I’m not comparing Ryan’s plan to President Obama’s budget priorities, just pointing out an interesting fact.)

Along those lines, Matt Yglesias introduces some necessary dread:

So give Ryan credit. It’s quite difficult to raise taxes on 90 percent of Americans while reducing overall tax revenue, but he’s shown enormous ingenuity in getting the job done. Remember that this is the top House GOP budget guy. If John Boehner becomes Speaker after the midterms, Ryan will be writing budgets for the new majority, presumably animated by the same moral principles that led him to this idea.