Senator Rand Paul on Taxes: Chip off the Old Block

Sen. Rand Paul, the nominally Republican presidential candidate, has inherited an uncommon trait from his father. He manages to inspire distrust in his credibility even as he conveys a message I want to hear and believe. On Thursday June 18th 2015, he had an op-ed in the Wall Street Journal about his proposed tax reform. Any national tax reform involves fiendishly difficult calculations about complex matters. Sen. Paul wants to junk the whole repulsive, disgusting, oppressive income tax and the IRS in favor of a flat tax. Music to my ears but difficult to believe his assertion that this replacement would be revenue neutral.

I don’t especially want federal revenue neutrality. I want the federal government’s share of GDP to decline. Yet, I understand that Mr Paul wishes to avoid conducting two discussions in one. (Junk the personal income tax; decrease the power of the federal government.) So, he has not done anything wrong there.

My problem is that in the course of a longish piece, he misuses grossly two sets of simple, basic economic terms. In this second paragraph, he refers to “duties and tariffs…” Toward the last third, he states something about “small businesses” and “corporations.” Both statements would be unacceptable in a sophomore basic economics class, even in a introduction to economics in a reasonably good high school.

Here is the first mistake: duties and tariffs are the same object. A “duty” is a tax on imports (or, very rarely, on exports). A tariff is the mechanism used to levy such taxes. It could be 10% of the value of the import or it could be $1 per bottle, for example. (Both methods are common.) That’s it. Referring to “duties and tariffs” proves beyond any doubt that you don’t understand the ordinary and oldest form of taxation. It looks bad in an essay devoted to …taxation.

Contrasting, or building any sort of parallel construction between “small business” and “corporations” is a common mistake but it does not belong under the pen of an elected politician who wants, as his main contribution, to overturn the way we have been financing most government for fifty years. “Small” businesses are in fact small. “Corporations” can be of any size, including two people, such a dentist and his wife. Most American corporations are small. The word corporation refers to a legal arrangement. It has nothing to do with the size of the business.

It’s as if Sen Paul did not know simple stuff when he talks about complex stuff. It’s as if, even more seriously from the standpoint of his credibility, he had no one to proofread his writing for blatant errors. It’s as if he were so convinced of knowing everything that he did not need -ever – anyone looking over his shoulder. If these two mistakes are the product of carelessness, they also imply hubris. That’s worse than simple ignorance because it has no cure in a grown man.

How can I trust someone to unravel the complex relationship between taxes, government revenue, economic growth, and personal liberty when he sounds like one of my indifferent former students?