Budget Spinning: What It’s Called Is More Important Than What’s Done

Posted April 21, 2008 at 4:13pm

You really can’t help but be impressed at the extraordinary efforts the White House and Congress make during a federal budget debate to get people to think they’re doing something different than what’s actually being done.

[IMGCAP(1)]The typical way is to give what they’re doing a new and totally misleading name so they can get people to agree to something they would never agree to otherwise.

The best example used to be the “death tax.”

Several years ago, when the opponents of the federal estate tax decided to make a serious effort to get it reduced or eliminated, they came up with the absolutely brilliant public relations strategy to build support by changing its name. Instead of the estate tax, they started to refer to it as the death tax.

That one change probably had more to do with it being adopted than any argument made by any politician, economist or tax attorney. The reason is simple. Even though it may only be a collection of cassette tapes, college textbooks, some videos in betamax format and several pairs of boxer shorts that long ago had outlived their natural lives, everyone has an “estate” of some kind when they die.

But few people think of it in those terms. For the average person, an estate is something only wealthy people have so a tax on it won’t really apply to them. They don’t care about it and won’t get involved in the debate. That limits Congressional interest and support.

But even if they don’t think they have an estate, everyone is sure they’re going to die. That makes a tax on dying — a death tax — seem to apply to everybody and broadens the issue in a way that “estate tax” could never do.

It also opens up the type of rhetorical opportunities that only a writer for David Letterman or “The Daily Show” could truly appreciate. A new department was created today to collect federal taxes from people who have died. You have to have your tax records checked before being allowed into heaven (you can pay by credit card or check if the angels find you to be delinquent). When they say only death and taxes are certain, they’re not kidding.

The reality, of course, is that the death tax doesn’t tax death any more than the personal income tax taxes life. In fact, consumption and sales taxes are really the ones that tax your death because they apply to coffins, funeral services and burial plots.

The death tax has now been replaced as the best example of an issue that says one thing but really means another. The more I keep hearing President Bush and others use the phrase “tax rebate” to describe the economic stimulus checks that will soon be received by millions of Americans, I have to admit that, while it’s close, we have an all-time new champion misleading budget phrase.

Let’s start with basics: Some of the people who receive a “rebate” check won’t actually have paid any taxes. In other words, the federal government can’t issue a tax rebate to them because they didn’t make any payments to begin with.

Second, some may say that the fact that the check is coming from the U.S. Treasury, the federal department charged with collecting taxes, justifies calling this a tax rebate. That’s nonsense. With the exception of a handful of mostly covert federal agencies that maintain separate accounts, all government checks come from the Treasury Department. Whether you’re a recipient getting monthly benefits, an employee getting a salary or a contractor getting paid for its services, if the funds aren’t direct-deposited in your account you get a check from the Treasury.

Third, with one very important exception, everything the government does is a tax rebate of some kind. Some of us get our taxes returned to us directly when we get cash benefits, salaries or payments. Others get that rebate in noncash ways such as highways, national parks, defense and public safety.

Ironically, the one time getting a check is not a tax rebate is what’s happening with these economic stimulus checks, that is, when the amount being “rebated” far exceeds the amount of taxes collected. The entire economic stimulus plan is being paid for with additional government borrowing. That means that no one receiving a check in the coming weeks is actually receiving any of his or her money back because those tax payments long ago were committed to other things. All they’re getting now is an additional piece of the national debt.

The tax rebate checks the president and others are referring to are nothing more than additional old-fashioned spending. What the White House and Congress did was enact a $150 billion entitlement. And they did it with the type of speed that we haven’t seen since the Great Society and the reaction to Hurricanes Katrina and Rita.

It probably would have been impossible to get a stimulus plan called an entitlement passed by Congress. Indeed, just calling it “spending” would have so decreased support for it that the vote might have been close.

But even though the bottom-line effect on the federal budget was exactly the same as a spending program, calling it a tax rebate somehow made the effort far more politically acceptable. The Bush White House could continue to use its anti-spending rhetoric when accepting it, Congressional Republicans could appear to maintain anti-spending credentials when voting for it and Congressional Democrats could avoid the politically sensitive charge in an election year of being big spenders.

It’s hard not to wonder what could be ahead. A tax on mattresses could be referred to as the sleep tax. And given how many people read columns on the budget, everyone would get a budget column rebate to offset the tremendous amount of time they spend on these issues.

Stan Collender is managing director at Qorvis Communications and author of “The Guide to the Federal Budget.” His blog is capitalgainsandgames.com.