The media's tax fraud

When is a tax cut for 98 percent of taxpayers portrayed as a tax increase? When some of the small handful of people whose taxes will go up happen to control the nation's news media.

Last week, President Obama unveiled a budget outline that extends the Bush tax cuts for all but the top two percent of taxpayers and makes permanent a tax credit of up to $800 for low- and middle-income workers that was included in the recent stimulus package, among other tax cuts.

On the other hand, individual taxpayers with taxable income above $200,000 ($250,000 for families) per year would pay more in taxes under Obama's plan, under which the tax rates paid on income in the top brackets would revert to their levels under President Clinton in the 1990s -- from 33 and 35 percent to 36 and 39.6 percent. Slate.com's Daniel Gross estimates that for someone with $350,000 in income, this will amount to about $1,500 a year in increased taxes.

So: Obama's plan cuts taxes for the vast majority of Americans, while raising them for the small number of people who make more than $200,000.

But the media, eager to hype their bogus "war on the wealthy" storyline, have portrayed it as a tax increase.

Here's how The Washington Post led its front-page article last Friday, the day after the plan was announced:

President Obama delivered to Congress yesterday a $3.6 trillion spending plan that would finance vast new investments in health care, energy independence and education by raising taxes on the oil and gas industry, hedge fund managers, multinational corporations and nearly 3 million of the nation's top earners.

The article was chock-full of details about the tax hikes, referring to "nearly $1 trillion in new taxes over the next decade on the nation's highest earners ... $318 billion in new taxes on families in the highest income brackets, who would see new limits on the value of the tax breaks from itemized deductions. ... That proposal is a fraction of the new taxes Obama proposes to heap on the nation's highest earners. ... Hedge fund managers would take an even bigger hit. ... Oil and gas companies would be asked to pay an extra $31 billion over the next 10 years ... Corporations that operate overseas could expect to pay $210 billion more over the next 10 years."

By my count, at least 484 of the article's 1,284 words were about the tax increases in Obama's proposal. Among those 484 words was this quote from House GOP leader John Boehner: "The era of big government is back, and Democrats are asking you to pay for it." That simply isn't true, unless you make more than $200,000 a year -- though the Post simply presented Boehner's claim without rebuttal.

And how did the Post address the tax cuts in Obama's plan? The article devoted just 39 words to them. Among other omissions, the Post completely ignored the fact that the plan makes permanent the Bush tax cuts for the vast majority of Americans.

And by the following Monday, tax cuts had disappeared entirely from the Post's reporting. Under the headline "Aides Defend President's Budget; White House and Fiscal Conservatives Set for Showdown," the Post reported Obama's budget would be "raising taxes on top income earners and oil and gas companies" and again quoted a Republican criticizing the tax increases. But there wasn't so much as a hint that most Americans would see their tax bills go down.

The New York Times' coverage of Obama's proposal was little better -- and cable news was often even worse.

Here's one indication of how hysterical the media went over potential tax increases for very few Americans: both The New York Times and ABC News rushed to produce reports about wealthy taxpayers purportedly seeking to reduce their incomes to avoid paying the higher tax rates. The ABC article in particular was deeply flawed, prompting widespread condemnation that led to an editor's note and re-write that improved things -- if only a little.

What makes all of this even more absurd is that the increase in the top tax rates probably shouldn't be considered a tax hike in the first place. Obama's tax rate proposal merely allows the Bush tax cuts to expire as they were designed. See, when the Republican Congress passed, and President Bush signed, the tax cuts in 2001, they decided not to make them permanent, scheduling them to expire in 2010. Obama's proposal simply allows that to happen for the top rates -- it makes no change to what is already going to happen under current law.

If the expiration, on schedule, of tax cuts that were always scheduled to expire is described as a policy of raising taxes, that makes a mockery of the entire tax policy debate of the past decade. It rigs tax debates in favor of Republicans, who find it easier to argue for tax cuts for the wealthy if they can argue that the cuts won't cost very much -- by making them "temporary" -- but who then get to argue that the scheduled expiration that they included in order to make the cuts look affordable would constitute a tax increase. The GOP gets to have it both ways, describing tax cuts as temporary when it helps them, and pretending they were intended to be permanent when it helps them. It's no great surprise Republicans want to have it both ways -- but that doesn't mean the media should go along.

The actual change the Obama proposal makes to the Bush tax rates is making permanent the cuts for those who make less than $200,000. The proposal doesn't actually increase income tax rates for anyone compared to current law, and it reduces them for the vast majority of taxpayers. Yet the "increase" -- mandated by a law signed by President Bush, and scheduled to occur for nearly a decade -- has gotten all the attention, while the cuts have largely escaped notice from the major media.

That is certainly not a new phenomenon. The elite media have long behaved as though the only part of tax policy that matters is the part that affects the wealthy.

During last year's Democratic primary debates, ABC's Charlie Gibson asked the candidates about their plans to let some of the Bush tax cuts lapse as scheduled. When Hillary Clinton pointed out that the candidates were planning to let expire only the cuts for the wealthiest taxpayers, Gibson famously claimed that would include public schoolteachers. Gibson's lack of understanding of the typical family's income (and tax) situation was so clear, the debate audience actually laughed at him.

Just a few weeks later, it was Wolf Blitzer's turn to moderate a debate. When Clinton said she would pay for her health care proposal by using the additional tax revenue that would result from allowing the expiration of the Bush tax cuts for "people making more than $250,000 a year," Blitzer responded:

BLITZER: I just want to be precise. When you let -- if you become president, either one of you -- let the Bush tax cuts lapse, there will be effectively tax increases on millions of Americans.

Blitzer was actually being much less precise. Clinton (and Obama) had both stated very clearly that they would allow the expiration of only the cuts for the very wealthy. Under the guise of being "precise," Blitzer then re-stated their positions more vaguely, speaking of "tax increases on millions of Americans." Which millions? Clinton and Obama had been clear; Blitzer was not -- and so many viewers likely thought he was talking about them.

Blitzer, like Gibson, had portrayed a very narrow proposal that would affect only the very highest-income workers as something much broader; something that would affect the typical taxpayer. I noted at the time:

You have to wonder how media stars like Blitzer and Gibson have lost touch with their viewers so badly that they think $200,000 incomes are typical.

Charlie Gibson reportedly makes $8 million a year and is paid less than his counterparts at CBS and NBC.

Might that have something to do with his lack of perspective? How could it not?

Charlie Gibson would see his taxes go up under the Democrats' plan. So would Wolf Blitzer. And, coincidentally, they suggest that their viewers' taxes would go up, too -- even though for the vast majority of viewers, that isn't true.

The media's tendency to behave as though the top tax bracket is the only one that matters badly skews tax policy debates. And you have to imagine it alienates some of the vast majority of readers and viewers who are not in that bracket.