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Driving A Wedge Between Reality and Reporting

Posted By David Kreutzer, Ph.D. On April 19, 2011 @ 1:20 pm In Economics | Comments Disabled

Self-styled commentator, comedian, and wedge-issue fan, Tina Dupuy, recently drove a wedge between reality and reporting.  In her Atlantic column [1] she declares the bogus assertions of Citizens for Tax Justice as “fact,” and trashes The Heritage Foundation analysis for employing common sense and economic logic.

When an activity is rewarded, people engage in more of that activity.  When an activity is penalized, people engage in less of it.  The greater the reward or penalty, the greater will be the response.  If anything in the social sciences can be universally regarded as fact, it is those preceding statements.

Nevertheless, Tina Dupuy’s “fact” is based entirely on ignoring this universal truth.  She cites, as fact, the Citizens for Tax Justice analysis [2] of tax revenues for the years 2001-2006.  The table on page two makes clear they assume tax rates have no effect on people’s behavior.  That is, had there been no tax cuts, revenues would have been higher by exactly the increase in tax rates.

This absurd logic decimated the high-end boat-building industry in the early 1990s.  In 1991 a 10 percent tax on luxury boats went into effect.  Compared to 1990, the 1991 sales dropped 70 percent [3].  The original tax projection (like those done by Citizens for Tax Justice) assumed sales would be unaffected by the tax.  After a decade of losing sales to foreign producers the tax was dropped with bi-partisan support.

Certainly there can be debate over how much people respond to tax rates, but zero is not one of the possibilities.

Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/04/19/driving-a-wedge-between-reality-and-reporting/

URLs in this post:

[1] Atlantic column: http://www.tinadupuy.com/articles/the-atlantic-the-man-behind-paul-ryans-budget-plan-got-the-tax-cuts-wrong-too/

[2] Citizens for Tax Justice analysis: http://www.ctj.org/pdf/housetestimony030507.pdf

[3] dropped 70 percent: http://www.nytimes.com/1992/02/07/business/falling-tax-would-lift-all-yachts.html

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