David Leonhardt has an op-ed column about income taxes that is so misleading and inaccurate that if it came from President Trump, the Times would be up in arms about it. The column is worth spending some time with as an example of just how flagrant the Times can be in trampling the truth.
The most glaring falsehood concerns the actual top federal marginal tax rate. Mr. Leonhardt writes, "Since 1987, the top rate has hovered between 30 percent and 40 percent."
Actually, in 1988, 1989, and 1990, the top rate was 28%.
Mr. Leonhardt can maybe claim he was rounding up, but when Mr. Trump rounded 37.4% up to "almost 40%," the Times jumped all over him about it.
Mr. Leonhardt writes:
I am convinced that the current top tax rate, 39.6 percent, is too low.
It has contributed to soaring inequality, with the affluent having received both the biggest pretax raises and the biggest tax cuts. Plus, there is no evidence that a modestly higher rate would hurt the economy. The recent president with the strongest economic record, Bill Clinton, increased the rate...
That is misleading on at least two counts. First, describing "the current top tax rate" as 39.6% ignores state and local personal income taxes, which, as the Times itself has acknowledged in a front-page news article, bring the top combined federal and state rate up to 51.9% for Californians and 51.7% for residents of New York City, who pay a city income tax in addition to state and federal income taxes.
Second, economic growth during the Clinton era is attributable to cuts in capital gains tax rates (driven by the Republican Congress) and cuts in tariffs (NAFTA, GATT), which Mr. Leonhardt doesn't mention at all. As I've written elsewhere:
The growth really got going after Clinton signed NAFTA and got tariff reductions though GATT/WTO that Lawrence Summers has called "the largest tax cut in the history of the world." And after 1997, when Clinton signed a bill cutting the top long-term capital gains rate to 20% from 28%.
Mr. Leonhardt's case for higher taxes is embedded in an anecdotal paean to George Romney, described by Mr. Leonhardt as "a highly successful and personally decent man who thought that making even a couple million dollars a year was unseemly."
Mr. Leonhardt writes:
A half-century ago, a top automobile executive named George Romney — yes, Mitt's father — turned down several big annual bonuses. He did so, he told his company's board, because he believed that no executive should make more than $225,000 a year (which translates into almost $2 million today).
He worried that "the temptations of success" could distract people from more important matters...This belief seems to have stemmed from both Romney's Mormon faith and a culture of financial restraint that was once commonplace in this country.
Romney didn't try to make every dollar he could, or anywhere close to it. ...
The old culture of restraint had multiple causes, but one of them was the tax code. When Romney was saying no to bonuses, the top marginal tax rate was 91 percent. Even if he had accepted the bonuses, he would have kept only a sliver of them.
There are at least three problems with this argument.
First, again, it ignores the effect of state and local income taxes. Back when George Romney was running American Motors, the federal top rate was 91%, but the Michigan state income tax didn't exist. It was established in 1967 and now stands at 4.25%.
Second, Mr. Leonhardt's two explanations of Romney's behavior are in tension with each other. One explanation is culture and religion — Romney thought making too much money was "unseemly." The other explanation is the tax rate — even if Romney did want to make a huge amount of money, he couldn't, because it would be taxed away. Mr. Leonhardt attempts to bridge this difference by claiming that the tax rate caused the cultural restraint, or at least was a contributing factor. That's convenient, but not satisfactory. Certainly there are other people in countries, or states, with high tax rates who do try really hard to make every dollar they can, even to the point of moving to other places with lower tax rates. That suggests that maybe tax rates are weaker contributors to culture than Mr. Leonhardt would have you believe they are. Even if confiscatory tax rates might have some salubrious effects on culture, they may also have some deleterious ones: why work hard if the government is going to take away nearly everything that you earn? If it's a culture of excess or greed that Mr. Leonhardt is really concerned about, maybe it'd be more effective to address it head on, rather than by raising the tax rate and hoping that will help.
Third, though Mr. Leonhardt portrays George Romney as a success, in business terms the story is less clear, especially long-term. American Motors no longer exists as an independent company. It became part of Chrysler, which has had to be bailed out by taxpayers twice, first in 1979 in the Lee Iacocca era, then again in the 2008-2009 George W. Bush-Barack Obama-Steve Rattner era. It's one thing for Mr. Romney or some other American Motors executive not to try to "make every dollar he could, or anywhere close to it." It's another thing to fail in the competition with Japanese automakers who made better cars, so that American Motors shareholders fail to get a decent return on their investment.
This is the same David Leonhardt, by the way, who was described by Yale's president Richard Levin in a speech as a big success story of liberal arts education, and who wrote an August 4, 2011 Times item headlined "Stocks Are Still Expensive." The S&P 500 Index has roughly doubled since then.