[Congressional Record Volume 148, Number 151 (Wednesday, November 20, 2002)]
[Senate]
[Pages S11716-S11718]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    ACCURACY IN STATISTICS AND THE DEBATE OVER BIPARTISAN TAX RELIEF

  Mr. GRASSLEY. Mr. President, I rise today to discuss the importance 
of accuracy in the debate over bipartisan tax relief.
  I was very pleased to work with over one-fourth of the Senate 
Democratic Caucus in passing the largest tax cut in a generation. That 
legislation has been the subject of a coordinated attack by the 
Democratic leadership and some of its allies in the media. For almost a 
year and a half, I have responded to these attacks in committee, on the 
Senate floor, and in the media.
  The basic premise of my responses has been that participants ought to 
be intellectually honest in the data used in the debate. Reasonable 
folks can differ on whether bipartisan tax relief is a good idea or 
not. We ought to conduct that debate in a fair and open manner.
  Apparently, my responses caught the eye of a key opinion maker, Mr. 
Paul Krugman of the New York Times. Mr. Krugman is a regular columnist 
and focuses mainly on economic policy. Mr. Krugman took aim at me and 
my statements in a column, dated October 18, 2002. I ask unanimous 
consent that a copy of that op-ed be included in the Record.
  Mr. Krugman defended the often-mentioned but seldom-sourced statistic 
on distribution of the benefits of the tax relief package. It's the 
statistic we hear over and over again. The statistic claims that 40 
percent of the benefits of the tax relief package go to the top 1 
percent of taxpayers.
  Mr. Krugman claims that I did not have an alternative answer to the 
40 percent statistics.
  I responded in a letter to the editor, dated October 24, 2002.
  My letter sources data from the unbiased, official scorekeeper of tax 
policy for Congress, the Joint Committee on Taxation. This data had 
been placed in the record in the statements Mr. Krugman criticized. 
That data, updated for the last year the tax cut is distributed, 2006, 
shows that the top 1 percent of taxpayers will receive a lower share of 
the benefits of the tax cut, 27 percent, than their burden, 33 percent. 
The remaining difference of 6 percent is distributed to taxpayers 
within comes below $100,000. That's why Joint Tax concludes that the 
bipartisan tax relief makes the Tax Code more progressive.
  By the way, this fact is not incidental. It reveals a key ingredient 
to our bipartisan success in 2001.
  My Democratic partners in the bipartisan bill insisted that we make 
the Tax Code more progressive as a condition for their support. That 
was a condition that I shared with them. We would not have produced the 
bill in the Senate without their support.
  Mr. Krugman struck back at me again in a column dated October 29, 
2002. He claimed my letter was ``misleading'' because I did not include 
the benefits of death tax relief in the analysis. I ask unanimous 
consent that a copy of that op-ed be included in the Record.
  I prepared a response to Mr. Krugman and submitted it to the New York 
Times editor. Unfortunately, the Times policy only permits two 
responses per person per year. So, Mr. Krugman can attack me every week 
if he wants to and my responses are limited. So, Mr. Krugman and the 
Times policy left me with the recourse of responding on the Senate 
floor. Otherwise, his charge would stand unanswered. That would be 
wrong.
  Joint Tax does not distribute the death tax benefit because the 
analysis

[[Page S11717]]

requires a conceptual leap. Economists have attempted to distribute the 
death tax benefit.
  For instance, the Clinton Treasury performed an analysis at about the 
same time the former President was readying a veto on a tax bill that 
contained death tax relief. Joint Tax attempted to distribute the same 
kind of analysis in the early 1990s, but abandoned it after finding 
problems with it.
  If you only read Mr. Krugman's columns, you would think that this 
analysis is straight forward. It is not. Basically, to get to where Mr. 
Krugman and his allies want to go, you have to make a conceptual leap. 
You have to assume that heirs of an estate have the same income tax 
profile as the dead person. So, you need to ignore the reality that, 
for instance, tax-exempt organizations, can be heirs of an estate. You 
need to ignore the reality that, as a general matter, no two sets of 
heirs look the same for income tax purposes. For these reasons, an 
unbiased official source, like Joint Tax, does not distribute the death 
tax. That was the point I was not permitted to make in a response.
  For the sake of argument, however, let's give Mr. Krugman the benefit 
of the doubt. Let's stack the deck further in his favor by assuming 
that all of the death tax relief provided in 2006 inures to the benefit 
of the top 1 percent. Let's perform this calculation even though it is 
analytically unsound. If you add that revenue loss, about $4.6 billion 
for 2006, into Joint Tax's distribution table, you will find that the 
top 1 percent receive 29 percent of the benefits of the tax relief 
package. This compares with the 27 percent official Joint Tax figure. 
Recall that the top 1 percent bear 33 percent of the income tax burden. 
In this case, the 4 percent difference, once again, though to a smaller 
degree, increases the progressivity of the Federal tax system.
  Mr. Krugman also cites an alternative tax burden, total Federal 
taxes, as the appropriate measure. Joint Tax's distribution analysis 
includes the Federal tax burden and as the projection for the last year 
shows the total Federal tax system was made more progressive.
  Mr. President, I agree with Mr. Krugman on some things. We need to 
change the tone in Washington. If the tone is to change, all 
participants, including public servants, like myself, and opinion 
makers, like Mr. Krugman, must participate in the change.
  Several things must happen if the tone in Washington is to change. 
The first thing that needs to happen is everyone must debate in an 
intellectually honest manner. This means when a statistic is used, the 
source should be referenced. Mr. Krugman's op-ed is the rare exception 
when the source of the 40 percent figure has been revealed. Over the 
last 18 months, in countless Congressional debates, in press reports, 
and other venues, the 40 percent figure has been used without 
attribution. At every point when I have debated the other side of this 
issue, I have provided the source of my statistics.
  The source of the data is important because, in an honest debate, any 
biases should be revealed. The source of Mr. Krugman's statistic is Bob 
McIntyre of the Citizens for Tax Justice. I respect Mr. McIntyre as a 
spirited liberal advocate of his version of tax reform. Mr. McIntyre's 
organization has an agenda. It is a tax policy agenda that tends to be 
on the left side of the political spectrum. There are competing 
organizations on the right side of the political spectrum such as the 
Heritage Foundation. These organizations also produce data on tax 
legislation. I doubt Mr. Krugman would ever use alternative analyses. 
If he did use these analyses, I would expect him to cite the source.
  There are also unbiased sources of data. an honest debate ought to 
bring out that data and distinguish it from data produced from biased 
sources. The Joint Committee on Taxation, established in 1926, is an 
unbiased source of data on tax policy. By definition, Congress' 
official tax policy scorekeeper, Joint Tax works for the House and 
Senate. Joint Tax works for both sides of the aisle. Senator Max 
Baucus, a Democrat from Montana, is the current Chairman of Joint Tax. 
Last year, Congressman Bill Thomas, a Republican from California, was 
Chairman.
  Opponents of the bipartisan tax relief package, like Mr. Krugman, do 
not use this objective source of data.
  If we are to change the tone in Washington, not only do we need to be 
honest about statistics, but we should put statistics in the proper 
context. Mr. Krugman uses the tax benefit figure in isolation. Mr. 
Krugman ignores the context of tax burden. Joint Tax's distribution 
analysis for 2006, shows that taxpayers who received the greatest 
reduction in their tax burden were those with incomes between $10,000 
and $40,000. For instance, taxpayers with incomes between $10,000 and 
$20,000 will enjoy a reduction in their tax burden of 13.6 percent. 
Taxpayers with incomes over $200,000 will see their tax burden reduced 
by 6.1 percent. This example, drawn from Joint Tax, not a conservative 
think tank, puts the benefits of the tax cut in context.
  I agree with Mr. Krugman's objective. I also agree with many of his 
sentiments about my late friend, Senator Paul Wellstone. Senator 
Wellstone liked a good and vigorous debate. He did so in an 
intellectually honest manner. Let's change the tone in Washington. Mr. 
Krugman has a role as an opinion maker who opposes last year's 
bipartisan tax relief package. I welcome a lively exchange with him and 
others of his view. All I ask is that we have that exchange in 
intellectually honest terms.
  So I describe a real difference in the approach of midwestern 
transparent Iowans and that of an ivory tower easterner.
  I ask unanimous consent to print the aforementioned materials in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                               Washington, DC.

                                                 October 30, 2002.
     Re ``For the People,'' by Paul Krugman (column, Oct. 29): I 
         continue to call for unbiased tax data in policy debates.

     To the Editor,
     The New York Times.
     New York, NY.

                     Maybe You Can Take It With You

       I share many of Mr. Krugman's sentiments about my late 
     neighbor and friend, Senator Paul Wellstone. As the Senate's 
     only working farmer, I was a ready partner of Senator 
     Wellstone in efforts to help family farmers.
       Mr. Krugman described the data in my letter as 
     ``misleading.'' His dispute lies not with me, but with 
     Congress' official, unbiased, tax policy scorekeeper, the 
     Joint Committee on Taxation. Joint Tax says ``estate and gift 
     taxes are not included due to uncertainty concerning the 
     incidence of those taxes.''
       The uncertainty arises, in part, because estate tax relief 
     goes to the estate's heirs, not the dead person. For income 
     tax purposes, generally the person earning income is alive to 
     enjoy it. Attempts to distribute the estate tax benefit are, 
     at best, a very rough calculation. In effect, those who take 
     Mr. Krugman's view, believe the dead person benefits from 
     estate tax relief. Only those in the ivory towers of academia 
     believe you can take tax relief to the grave.
           Sincerely,
                                           Senator Chuck Grassley,
     Ranking Member, Finance Committee.
                                  ____


                [From the New York Times, Oct. 29, 2002]

                             For the People

                           (By Paul Krugman)

       Ghoulish but true: as Minnesota mourns the death of Senator 
     Paul Wellstone, many of the state's residents have been 
     receiving fliers bearing a picture of a tombstone. The flier, 
     sent out by a conservative business group, denounce the late 
     senator's support for maintaining the estate tax. Under the 
     tombstone, the text reads in part: ``Paul Wellstone not only 
     wants to tax you and your business to death . . . he wants to 
     tax you in the hereafter.''
       To be fair, the people who mailed out those fliers--which 
     are carefully worded so that the cost of the mailing doesn't 
     officially count as a campaign contribution--didn't know how 
     tasteless they would now appear. Yet in a sense the mass 
     mailing is a fitting epitaph; it reminds us what Paul 
     Wellstone stood for, and how brave he was to take that stand. 
     Sometimes it seems as if Americans have forgotten what 
     courage means. Here's a hint: talking tough doesn't make you 
     a hero; you have to take personal risks. And I'm not just 
     taking about physical risks--though it's striking how few of 
     our biggest flag wavers have ever put themselves in harm's 
     way. What we should demand of our representatives in 
     Washington is the willingness to take political risks--to 
     make a stand on principle, even if it means taking on 
     powerful interest groups.
       Paul Wellstone took risks. He was, everyone acknowledges, a 
     political who truly voted his convictions, who supported what 
     he thought was right, not what he thought would help him get 
     re-elected. He took risky stands on many issues: agree or 
     disagree, you have to admit that his vote against 
     authorization for an Iraq war was a singularly brave act. Yet 
     the most consistent theme in

[[Page S11718]]

     his record was economic--his courageous support for the 
     interests of ordinary Americans against the growing power of 
     our emerging plutocracy.
       In our money-dominated politics, that's a dangerous 
     position to take. When Mr. Wellstone first ran for the 
     Senate, his opponent outspent him seven to one. According to 
     one of his advisers, the success of that ramshackle campaign, 
     run from a rickety green school bus, ``made politics safe for 
     populists again.''
       If only. Almost every politician in modern American 
     pretends to be a populist; indeed, it's a general rule that 
     the more slavishly a politician supports the interests of 
     wealthy individuals and big corporations, the folksier his 
     manner. But being a genuine populist, someone who really 
     tries to stand up against what Mr. Wellstone called ``Robin 
     Hood in reverse'' policies, isn't easy: you must face the 
     power not just of money, but of sustained and shameless 
     hypocrisy.
       And that's why those fliers are a perfect illustration of 
     what Paul Wellstone was fighting.
       On one side, the inclusion of estate tax repeal in last 
     year's federal tax cut is the most striking example to date 
     of how our political system serves the interests of the 
     wealthy. After all, the estate tax affects only a small 
     minority of families; the bulk of the tax is paid by a tiny 
     elite. In fact, estate tax repeal favors the wealthy to such 
     an extent that defenders of last year's tax cut--like Senator 
     Charles Grassley, who published a misleading letter in 
     Friday's Times--always carefully omit it from calculations of 
     who benefits. (The letter talked only about the income tax; 
     had he included the effects of estate tax repeal, he would 
     have been forced to admit that more than 40 percent of the 
     benefits of that tax cut go to the wealthiest 1 percent of 
     the population.) To eliminate the estate tax in the face of 
     budget deficits means making the rich richer even as we slash 
     essential services for the middle class and the poor.
       On the other side, the estate tax debate illustrates the 
     pervasive hypocrisy of our politics. For repeal of the 
     ``death tax'' has been cast, incredibly, as a populist issue. 
     Thanks to sustained, lavishly financed propaganda--of which 
     that anti-Wellstone flier was a classic example--millions of 
     Americans imagine, wrongly, that the estate tax mainly 
     affects small businesses and farms, and that its repeal will 
     help ordinary people. And who pays for the propaganda? Guess. 
     It's amazing what money can buy.
       In an age of fake populists, Paul Wellstone was the real 
     thing. Now he's gone. Will others have the courage to carry 
     on?
                                  ____


                [From the New York Times, Oct. 25, 2002]

                          A Tax Cut for Whom?

       To the Editor: Re ``Springtime for Hitler,'' by Paul 
     Krugman (column, Oct. 18): I stand by my call for unbiased 
     tax data in policy debates. Some observers claim that 40 
     percent of last year's tax cuts went to the top 1 percent of 
     taxpayers. The Joint Committee on Taxation, Congress's 
     official, unbiased source, says the top 1 percent will 
     receive 27 percent of the income tax cuts in 2006, the latest 
     projection available. Taxpayers with incomes of $200,000 and 
     less will receive the majority of the tax-cut benefits, with 
     67 percent.
       The real story is that despite those cuts, the top 1 
     percent of taxpayers will still pay 33 percent of federal 
     income taxes. They will receive a lower share of the income 
     tax cut, 27 percent, than their burden, 33 percent.
       The joint committee says the taxpayers who will receive the 
     greatest reduction in their tax burden have incomes between 
     $10,000 and $40,000. Those with incomes between $10,000 and 
     $20,000 will enjoy a reduction of 13.6 percent. Those with 
     incomes of more than $200,000 will see their burden reduced 
     by 6.1 percent. Intellectual honesty demands putting tax data 
     in context.
     Chuck Grassley.
                                  ____


                [From the New York Times, Oct. 18, 2002]

                           (By Paul Krugman)

                         Springtime for Hitler

       You may recall that George W. Bush promised, among other 
     things, to change the tone in Washington. He made good on 
     that promise: the tone has certainly changed.
       As far as I know, in the past it wasn't considered 
     appropriate for the occupant of the White House to declare 
     that members of the opposition party weren't interested in 
     the nation's security. And it certainly wasn't usual to 
     compare anyone who wants to tax the rich--or even anyone who 
     estimates the share of last year's tax cut that went to the 
     wealthy--to Adolf Hitler.
       O.K., maybe we should discount remarks by Senator Phil 
     Gramm. When Mr. Gramm declared that a proposal to impose a 
     one-time capital gains levy on people who renounce U.S. 
     citizenship in order to avoid paying taxes was ``right out of 
     Nazi Germany,'' even the ranking Republican on the Senate 
     Finance committee, Charles Grassley, objected to the 
     comparison.
       But Mr. Grassley must have thought better of his objection, 
     since just a few weeks later he decided to use the Hitler 
     analogy himself: ``I am sure voters will get their fill of 
     statistics claiming that the Bush tax cut hands out 40 
     percent of its benefits to the top 1 percent of taxpayers. 
     This is not merely misleading, it is outright false. Some 
     folks must be under the impression that as long as something 
     is repeated often enough, it will become true. That was how 
     Adolf Hitler got to the top.''
       For the record, Robert McIntyre of Citizens for Tax 
     Justice--the original source of that 40 percent estimate--is 
     no Adolf Hitler. The amazing thing is that Mr. Grassley is 
     sometimes described as a moderate. his remarks as just one 
     more indicator that we have entered an era of extreme 
     partisanship--one that leaves no room for the acknowledgment 
     of politically inconvenient facts. For the claim that Mr. 
     Grassley describes as ``outright false'' is, in fact, almost 
     certainly true; in a rational world it wouldn't even be a 
     matter for argument.
       You might imagine that Mr. Grassley has in hand an 
     alternative answer to the question ``How much of the tax cut 
     will go to the top 1 percent?''--that the administration has, 
     at some point, produced a number showing that the wealthy 
     aren't getting a big share of the benefits. In fact, however, 
     administration officials have never answered that question. 
     When pressed, they have always insisted on answering some 
     other question.
       But last year the Treasury Department did release a table 
     showing, somewhat inadvertently, that more than 25 percent of 
     the income tax cut will go to people making more than 
     $200,000 per year. This number doesn't include the effects of 
     estate tax repeal; in 1999 only 2 percent of estates paid any 
     tax, and half of that tax was paid by only 0.16 percent of 
     estates. The number also probably doesn't take account of the 
     alternative minimum tax, which will snatch away most of the 
     income tax cut for upper-middle-class families, but won't 
     affect the rich.
       Put all this together and it becomes clear that, such 
     enough, something like 40 percent of the tax cut--it could be 
     a bit less, but probably it's considerably more--will go to 1 
     percent of the population. And the administration's 
     systematic evasiveness on the question of who benefits from 
     the tax cut amounts to a plea of nolo contendere.
       Which brings us back to the new tone in Washington.
       When Ronald Reagan cut taxes on rich people, he didn't deny 
     that that was what he was doing. You could agree or disagree 
     with the supply-side economic theory he used to justify his 
     actions, but he didn't pretend that he was increasing the 
     progressivity of the tax system.
       The strategy used to sell the Bush tax cut was simply to 
     deny the facts--and to lash out at anyone who tried to point 
     them out. And it's a strategy that, having worked there, is 
     now being applied across the board.
       Michael Kinsley recently wrote that ``The Bush campaign for 
     was against Iraq has been insulting to American citizens, not 
     just because it has been dishonest, but because it has been 
     unserious. A lie is insulting; an obvious lie is doubly 
     insulting.'' All I can say is, now he notices? It's been like 
     that all along on economic policy.
       You see, some folks must be under the impression that as 
     long as something is repeated often enough, it will become 
     true. That was how George W. Bush got to the top.

                          ____________________