Whopper of the Week: Rod Paige
Tax hikes did not put state governments in the hole.
"[T]his year many of our states are facing serious fiscal challenges—problems born out of rapid expansion of government spending in the 1990s, tax hikes that limited economic growth[italics Chatterbox's] and a decline in the financial markets. …"
—Education Secretary Rod Paige, "More Spending Is Not the Answer," in the Jan. 10 USA Today.
"Aggregate net state tax reductions from 1994 to 2001 equaled about 8.2 percent of state tax revenues. … Of the 16 states that raised taxes significantly in 2002, 13 states—Arizona, California, Connecticut, Illinois, Indiana, Kansas, Massachusetts, Nebraska, New Jersey, Ohio, Oklahoma, Oregon and Pennsylvania—had enacted large tax cuts in the period from 1994 to 2001. But only in three of those 13 states, Indiana, Kansas, and Nebraska, do the tax increases of 2002 appear to be large enough to balance out the tax cuts of 1994-2001."
—" The State Tax Cuts of the 1990s, the Current Revenue Crisis, and Implications for State Services," a report by the nonprofit Center on Budget and Policy Priorities.
(Thanks to Kevin Carey of the Education Trust.)
Discussion. The administration has said many misleading things this week to justify the new proposed tax cuts, but this one's an outright lie. Paige's op-ed doesn't mention the Bush cuts directly, but states had been hoping to receive substantially more financial assistance from Bush's economic package. Paige is saying here that states don't need more federal aid so much as they need to cut taxes. That's obviously a matter of opinion. But it's simply erroneous to claim that the states' current fiscal woes are the fault of tax hikes. As the Center on Budget and Policy Priorities report shows, during the 1990s the states reduced taxes, mainly because a booming economy allowed them to. Now that the boom's end has lowered revenues, states are raising taxes—but not enough to balance out the earlier cuts.
What sort of misleading things is the administration saying, as opposed to outright lies? Well, yesterday, Bush said that under his tax plan, "a family of four with an income of $40,000 will receive a 96 percent reduction in federal income taxes." But that family of four isn't paying all that much in income tax to begin with. Far more significant, notes Citizens for Tax Justice, is the fact that taxpayers in the top 1 percent, whose average income exceeds $1 million, will get tax cuts of more than $30,000.
Got a whopper? Send it to firstname.lastname@example.org. To be considered, an entry must be an unambiguously false statement paired with an unambiguous refutation, and both must be derived from some appropriately reliable public source. Preference will be given to newspapers and other documents that Chatterbox can link to online.
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.