Taxpayers Union Defends Its Grades

Published Mar 08 2010, 10:27 PM by David S. Bernstein

Pete Sepp of the National Taxpayers Union (NTU) was good enough to respond to my post from last week, in which I puzzled over the fact that NTU gave Democrats harsh marks for their American Recovery and Reinvestment Act (ARRA) votes, which included very large tax cuts. I wrote:

I realize that NTU would say that the heavy spending included in ARRA could, in theory, lead to tax increases in the future. But isn't $275 billion in the hand worth something?

Sepp reponded in the comments, and I'd like to bump the bulk of it up here:

Yes David, those tax cuts "in the hand" were worth something, but to us less than met the eye. The actual figure, for example, is lower than the $275 billion advertised by ARRA supporters. From the conference report on ARRA, the 3-year revenue total of the tax provisions was $252.879 billion, not $275 billion. About 25 percent of that $253 billion ($63.66 billion) consisted of "refundable" credits. This is counted as straight spending, since it is more than offsetting individual tax liabilities.

In our opinion, the few remaining tax provisions of value had more to do with small business expensing and depreciation than simply issuing rebate checks. So in the end the vote was a net negative for fiscal policy.

This is not an reasonable argument, as far as it goes. ARRA did provide for credits that, in many cases, were effectively redistributive rather than tax-reducing. Whether that was $63 billion worth I'd ask someone better versed than myself to check. And there were other pieces touted as "tax cuts" that were not really reducing tax obligation per se -- although I'm not sure why Sepp is so dismissive of the tax-reducing measures for businesses.

But even granting all that, it still seems to me that my wife and I paid $800 less in federal taxes thanks to ARRA -- as did pretty much every middle-class couple. Those with kids got an even bigger break. A whole slew of families who would have paid the Alternative Minimum Tax paid less in taxes thanks to ARRA. People who received unemployment paid less in taxes. Those were all tax cuts, and big ones, to the tune of billions and billions and billions of dollars -- even if we're not counting the ones Sepp doesn't want to count.

That's a lot in the hand. And again, NTU did not merely conclude that the vote was a "net negative" for fiscal policy -- it made the votes for ARRA count very heavily against the lawmakers who took those votes. I don't see how that's justified from the NTU's perspective, with all due respect to Mr. Sepp. I would like to see some others of you out there -- perhaps with a firmer grasp of ARRA nuances than myself -- weigh in!