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The Heritage Foundation's dishonest "survey"

By Brendan Nyhan (brendan@spinsanity.org)
February 27, 2003

In a fundraising pitch from the Heritage Foundation billed as a "Tax Increase Impact Survey" (2.6 MB PDF or page 1, 2, 3, 4, 5), the conservative think tank makes a series of hyperbolic and outright dishonest claims about "pending tax increases on families, businesses and senior citizens," once again putting public relations concerns before accuracy.

In the letter, Heritage claims that "President George W. Bush's historic 2001 tax cuts are set to expire thanks to a provision forced into the law by liberals in Congress," which will result in "an average tax hike" for taxpayers "of $1,040."

This is deceitful on a number of levels. First, the tax cuts will expire on December 31, 2010. That expiration - more than seven years away - is not immediately "pending" nor "set" to take place any time soon. Even worse, the statement that the tax cut will expire due to "a provision forced into the law by liberals in Congress" is wildly misleading. The phrasing "forced into the law" implies liberals demanded that the cuts expire in 2010, which is not the case.

The provision being referenced is actually a budget rule enacted in 1990 as part of the deficit reduction agreement between the Democratic Congress and President George H.W. Bush. Republicans have had more than a decade to repeal it, but they have not. As a result, passing a tax cut extending beyond September 30, 2011 (the end of the time horizon covered by the 2001 budget resolution) would have required a sixty vote majority in the Senate.

Rather than making the compromises required to put together a larger coalition, the Senate voted to approve a package that would have expired on September 30, 2011 under rules requiring only fifty votes. Negotiators working to resolve differences between the House and Senate versions of the bill then moved up the "sunset," or expiration, of the tax cuts to December 31, 2010 to be able to fit a larger tax cut into the $1.35 billion allocated under the budget resolution that year. In short, though the decision was obviously shaped by Senate rules, the design of the tax cut was a strategic choice by Republicans in a negotiation they controlled due to their majorities in both houses of Congress at the time.

Since then, President Bush and leading conservatives in Congress have played down their role in choosing an early sunset rather than one in 2011 or trying to obtain sixty votes to make the tax cut permanent. As Congressional Quarterly reported last year, "[House Ways and Means Chairman Bill] Thomas [R-CA], House Majority Leader Dick Armey, R-Texas, Senate Minority Whip Don Nickles, R-Okla., and Sen. Phil Gramm, R-Texas -- now the most adamant opponents of the sunset -- all signed the conference report" that created the 2010 sunset, and Bush -- who is now campaigning to make the tax cuts permanent -- signed the bill including the sunset into law. On Heritage's own website, analyst William W. Beach states that "Congress elected to 'sunset' much of the cut by 2011." (my emphasis)

Heritage also wants to have it both ways, warning of a tax increase resulting from the expiration of the tax cut while at the same time suggesting that making the cut permanent would reduce taxes from current levels. The letter states, for example, "[I]f President Bush's tax cuts are made permanent, over 100 million individuals and families will pay lower taxes, including 13 million seniors who will receive an average tax cut of almost $1,000." But it simply isn't logically possible for both things to be true at the same time. Either all the tax cuts are current law and their expiration is therefore a tax increase, or the Bush plan is a series of tax cuts that have only partially phased in. But the letter switches between both types of phrasing as though the two premises are interchangeable. In addition, implications of further tax cuts are misleading for most people - the majority of Americans have already received most of the tax cuts that they will get under the Bush plan.

Heritage later shifts to attacking "liberals such as Ted Kennedy [who] are working to bring back cruel taxes such as the Death Tax on grieving families and the Marriage Penalty" and "the liberals' crusade to revoke the tax cuts and defeat efforts to make them permanent." It is true that many liberals would revoke some or all of the Bush tax cut, and almost all oppose making it permanent. But according to the Christian Science Monitor, the "marriage penalty" elimination would go forward under Kennedy's proposal to repeal $350 billion of future tax cuts that have not yet been phased in.

Finally, the letter is filled with dubious statistics. Heritage alleges that "The Death Tax" is "the leading cause of the termination of successful small businesses in America. One in four small businesses will have to shut down to pay the Death Tax on grieving families, unless it is permanently repealed." Later, it uses slightly different phrasing, stating that "one out of every four" small businesses "will be forced out of business if the Death Tax is reinstated." This unsourced statistic is, as written, bogus. There were 22.4 million small businesses in 2001 according to the Small Business Administration - clearly 5.6 million of them will not "have to shut down" to pay the tax in 2011. Even a cursory examination of the facts shows what an outrageous claim this is. As of 1996, there were only 40,000 tax returns subject to the estate tax, so even if every single person with a taxable estate under previous law owned a small business (which is not the case) and each of those businesses had to close down to pay the tax, it would still take 140 years to reach a total equivalent to 25% of small businesses operating today (and that does not count the millions of new small businesses that would open in the meantime). In short, the numbers don't add up.

Nor are the "average" tax cut figures Heritage uses throughout the piece representative of the tax cuts that Americans in the middle of the income distribution will actually receive from the 2001 tax cut (due to the significantly larger benefits received by people at the top of the income distribution). And to say, as Heritage does, that "families will face a tax increase of as much as 100 percent" if Bush's plan is not made permanent is to say nothing at all. To assess such an increase, we would need to know whose taxes were being increased that much - how many people at what income levels with what tax liabilities? We can envision, for example, someone near the middle of the income distribution whose net income tax liability rises from $10 to $20 - a 100 percent increase, to be sure, but obviously not the image Heritage is attempting to conjure up of punitive tax increases.

The Heritage Foundation regularly demands to be treated similarly to quasi-academic center-left think tanks like the Urban Institute and the Brookings Institution. Yet it pushes PR-driven spin far more often and to much greater effect than its ideological opponents. In this case, the factually inaccurate and highly misleading claims went out in the name of Heritage's president, Edwin J. Feulner. This reflects poorly on Feulner, the institution and pundits like the Washington Post's David Broder who laud Heritage's "intellectual honesty."

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Related links:
-An obviously false Heritage media bias claim (Brendan Nyhan, 6/19/02)
-Creaky foundation (Brendan Nyhan, 5/10/02)

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