Thursday, October 25, 2007

Martire's tax chicanery works on Eric Zorn

Eric Zorn, Chicago Tribune columnist and the father of blogging in Chicago, takes a stab today at the question of whether Illinois is a low tax or high tax state. Zorn, like all of us, has views and biases, but, more than most, he tries to lay out issues fairly and come up with answers that make sense. His downfall today was to rely so much on Ralph Martire, Center for Tax and Budget Accountability. Zorn mentions others and discusses many more tax thinkers in his blog. However, for his column, Martire won Zorn’s heart.

Martire's Mission

Now, Ralph Martire is a nice guy and he has been a guest of Public Affairs [Watch Martire Feb. 25, 2007 episode in the Archives], which we appreciate. But, he is a man on a mission, not unlike someone running for political office, notwithstanding the purported non-partisan nature of his organization. And, that mission is to promote more spending and taxing at every government level: Federal, State, County, City, Village, whatever. Martire will find a “structural deficit” for every governmental entity (unless it sponsors school vouchers, in which case he would starve the beast).

Did Martire ever meet a tax hike he didn't like?

Zorn, in the comments section of his blog, defends Martire against the notion that Martire never met a tax hike he didn’t like by pointing to Martire’s opposition to Illinois Governor Rod Blagojevich’s Gross Receipts Tax (“GRT”) or Todd Stroger’s proposed 2% increase in the Cook County sales tax. However, Martire only opposed the GRT because he predicted (correctly) that his proposed Tax Swap (Illinois HB 750) would have been easier to sell politically, was less regressive and would give the state about the same additional increase in net tax revenue as Blagojevich’s GRT. Similarly, Ralph would like more revenue for Cook County government—he just would prefer other sources to a sales tax increase.

Martire's sales job on Zorn

With that as a backdrop, we turn to the sales job Martire did on Zorn for Zorn’s column of today. Martire likes to speak of tax burden by deflating tax payments as a percentage of income. While that is okay for certain analyses, it is not a good way to do cross-sectional studies, i.e., analysis of how much states are taxing relative to each other, at the same point in time. For that, you want to look at taxes per capita.

Think about it. If you paid $30,000 for a cosmetic surgical procedure and your neighbor paid $20,000 for the same procedure of the same quality, would you say you got a good deal because your income was $200,000 and you paid only 15% of your income, while your neighbor, who earns $100,000 per year, paid 20% of his income for the same procedure? Of course not, you paid $10,000 more than your neighbor for the same procedure. You should not be a happy camper.

Illinois: a High Tax state.

If you look at the Tax Foundation data [See Table 1, at p. 3], you can see that Illinois’ per capita state and local tax payment is $4594, making it the 15th highest state and local tax payer in the country, i.e., a relatively high tax state. For example, you can go to Arizona and pay only $3603 per capita in state and local taxes or Michigan and pay $4202. Arizona and Michigan are lower tax states than Illinois, irrespective of what the per capita income is in Illinois relative to other states.

Martire's income deflator

Martire doesn’t like that outcome, so he uses an income deflator for the cross sectional analysis—and he makes a few other adjustments—and look, mom, Illinois is now a low tax state. Martire and his organization are now happy campers. They can go out and proselytize to Zorn and others for more government spending and more taxes. And, Zorn fell for it: hook, line and sinker. And, by the way, Martire engages in the same chicanery when he wants to argue education spending in Illinois (about $11,000 per kid per year) is “low,” relative to other states.

This reporter doesn't know why Jim Tobin (cited in Zorn’s column) and Greg Blankenship (cited in Zorn’s blog) didn’t argue this to Zorn. Or, maybe they did, and Zorn wasn’t persuaded.

For some studies, deflating by income might make sense. If you want to know if government is taking a larger chunk of society’s wealth over time—yes, by all means, deflate by income or wealth.

Martire: Killing the Goose that laid the Golden Egg

But, if you want to know which states are low tax states at any given point in time, stick to per capita analyses. Further, a state that keeps its taxes low relative to others will drive its income up (especially if services are similar to other states), and that state, other things equal, will attract new business and new citizens. And, Ralph Martire will then tell you that state is a low tax state that needs to raise its taxes—which, of course, would kill the goose that laid the golden egg.

As the man said, Ralph Martire can fool some of the people (perhaps including Zorn) all the time and all the people (perhaps including Zorn) some of the time, but he can’t fool all the people all the time. So, if you are going to invite Martire to speak to your group—you need to invite a competing viewpoint, as well, but who that person would be, I just don’t know. I just don’t know.
Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search can be reached at You may watch "Public Affairs," shows with Presidential Candidates Richardson, Obama, McCain, Giuliani and Cox and many other pols at