Krugman: Holding national security hostage to help tax cheats

Historians of propaganda are familiar with the concept of the Big Lie, a claim so extreme that many people end up accepting it because they can’t believe that authority figures would make up something so at odds with reality.

It often seems to me that we need a term to describe a somewhat similar phenomenon in policy debates, which we might call the Big Grift. What I mean are policy proposals so corrupt, so obviously designed to benefit an undeserving few at everyone else’s expense, that many voters balk at the notion that seemingly respectable politicians actually advocate such things.

A case in point is the current demand by House Republicans that funding for Israel in this moment of crisis be tied to budget cuts that would undermine the ability of the Internal Revenue Service to crack down on wealthy tax cheats. This should be a major scandal, but my suspicion is that many voters just won’t accept the idea that GOP leaders would do something so cartoonishly villainous.

Some history: Way back in 2001, in the aftermath of Sept. 11, House Republicans passed a bill responding to the emergency by … cutting corporate taxes. At the time, my sources told me that when political consultants tried to describe the bill to focus groups of voters, they refused to believe that the legislation was being described accurately.

A decade later, when Mitt Romney endorsed Paul Ryan’s budget plan — which called for both tax cuts on high incomes and the conversion of Medicare into an underfunded voucher scheme — a focus group found voters simply unwilling to believe that this was Romney’s actual position.

The latest GOP proposal is, by any reasonable standard, even worse than these earlier initiatives. I mean, holding national security hostage unless we make it easier for wealthy tax cheats to break the law? Who would do that?

Yet I fear that the proposal’s very awfulness may protect it from scrutiny, because voters will be incredulous about claims that this idea is even on the table.

Still, I guess we do need to discuss the substance of the proposal, on the off chance that somebody might be paying attention.

First, the idea that cutting the IRS budget would somehow help pay for aid to Israel is utterly wrong. America has a huge “tax gap” — taxes legally owed but not paid. The bulk of that tax gap probably comes from wealthy Americans underreporting their incomes, which they can get away with because the IRS lacks the resources to fully enforce the law.

As a result, cutting IRS funding would actually increase the deficit by enabling more tax evasion, a conclusion confirmed by the Congressional Budget Office on Wednesday in its score of the House proposal.

Republicans, however, often claim that tax cuts do great things for the economy, and maybe even pay for themselves. There’s not a shred of evidence for that belief. Still, starving the IRS of funds is in a way a kind of tax cut. So can’t they make a similar argument here?

No, for several reasons.

For one thing, even if you believe (wrongly) that low taxes on the rich strongly encourage entrepreneurship or something, making it easier for a business owner to cheat on his taxes probably doesn’t have the same incentive effects as reducing his legal tax rate.

Furthermore, enabling tax evasion doesn’t help all businesses equally; it biases the economy toward activities, often unproductive, where tax fraud is relatively easy, such as real estate speculation. Did I mention that the Trump Organization has been convicted of tax fraud?

And making it easier to cheat on taxes by defunding the tax police probably has spillover effects that go beyond the direct adverse effect on enforcement. The more we become a society that rewards people who evade their fiscal obligations, the more likely it is that people who don’t cheat on their taxes will feel like chumps and losers. If Americans start to believe, as Leona Helmsley put it, that “only the little people pay taxes,” the damage to our society will surely be moral as well as fiscal.

Yet starving the IRS has long been a Republican priority; what’s new is the party’s willingness to serve that priority by endangering national security.

Where does this priority come from? I don’t pretend to have a full answer. I will note, however, that, as historian Rick Perlstein has pointed out, there has long been a close association between right-wing conspiracy theorizing and financial grifting. Alex Jones, the proprietor of the conspiracy site Infowars, best known for claiming that the mass shooting at Sandy Hook was a left-wing hoax, made his money by selling bogus dietary supplements — what my colleague Farhad Manjoo calls the “wellness-conspiracy industrial complex.”

And now that conspiracy theorists have effectively taken over the GOP, it kind of makes sense that one of their overriding policy priorities is to deprive the government of the resources it needs to crack down on grifters and financial fraud.

In any case, don’t be skeptical about news reports that Republicans are willing to sacrifice crucial national interests unless we make life easier for tax cheats. That is, in fact, exactly what is happening.

Paul Krugman is a New York Times columnist.