A Project of The Annenberg Public Policy Center

A New Twist on an Old Tax Attack

Democrats continue misusing tax pledge, but this time against a gubernatorial candidate.


Summary

Democrats and their allies can’t get enough of the Americans for Tax Reform tax pledge — which, as we’ve reported, they’ve falsely equated in a number of ads with "protecting tax loopholes for companies that ship jobs overseas." Still, Democrats continue to use the bogus charge against Republicans, including in West Virginia’s Senate race and House races in Connecticut, New York, Maryland and the state of Washington, to name a few.

And now, there’s a new twist on the false tax attack in the Massachusetts’ gubernatorial campaign. A labor-financed political committee accuses Republican Charlie Baker of "favoring tax loopholes that encourage corporations to ship our jobs overseas" and signing "a pledge to protect those loopholes." However, the pledge for gubernatorial candidates — a single sentence promising to oppose or veto any new state taxes — is different than the one for federal candidates, so the attack on Baker makes even less sense.

Analysis

We first wrote about the misuse of ATR’s Taxpayer Protection Pledge in April, when the Democrats tried to hold on to Hawaii’s 1st Congressional District in a special election. We  correctly predicted it would be a "prototype of future attack ads."

The Democratic Congressional Campaign Committee’s ad falsely accused Republican candidate Charles Kong Djou of signing a pledge "that protects tax breaks for companies that send jobs overseas." The Democratic spin: If you sign the pledge, then you oppose closing tax loopholes, an act that would raise taxes on U.S.-based corporations with foreign operations.

But, as we said at the time, the pledge a) says nothing about jobs, and b) does not rule out an overhaul of the tax code. So signers could vote to close tax loopholes and lower taxes elsewhere without violating the tax pledge. Here’s what the pledge says:

ATR’s Pledge for House and Senate Candidates

I will:

ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and

TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

The Democrats’ attack on Djou failed, and he became the first Republican to represent President Obama’s home state in Congress in 20 years. But that didn’t deter the Democrats.

More Faulty Logic

The most curious misuse of the pledge comes from Bay State Future — a recently formed 527 political organization funded by Service Employees International Union, the Massachusetts Teachers Association and the Democratic Governors Association.

Bay State’s ad — which first aired Sept. 28 — targets Charlie Baker, Republican candidate for governor in Massachusetts. It opens by asking the question, "Worried about jobs?" The ad then goes on to describe how Baker favors tax loopholes that encourage companies to ship jobs overseas and "even signed a pledge to protect those loopholes." The group cites the ATR pledge to support its claim.

[TET ]

Bay State Future TV Ad: “Goodbye Jobs”

Announcer: Worried about jobs? Well, Charlie Baker favors tax loopholes that encourage corporations to ship our jobs overseas. He even signed a pledge to protect those loopholes. So if Charlie Baker gets his way, ‘goodbye jobs, auf wiedersehen, bon voyage.’

[/TET]

But the pledge for candidates for governor is even more straightforward than the one for congressional candidates:

ATR’s Pledge for Gubernatorial Candidates

"I, (name of candidate), pledge to the taxpayers of the state of (name of state) that I will oppose and veto any and all efforts to increase taxes."

How can a simple no-new-taxes pledge encourage companies to ship jobs overseas?

In a memo defending the ad, Bay State Future cites an aviation bill passed by Congress this summer that included additional aid to states for education and Medicaid. "The bill was paid for partially by closing tax loopholes that encouraged corporations to ship American jobs overseas," the group says in its defense. "Charlie Baker, by signing the Americans for Tax Reform Taxpayer Protection Pledge has aligned himself with their platform and policies, which has [sic] opposed measures that would prevent outsourcing of American jobs overseas."

That logic is baffling to us on a number of levels:

  • Baker isn’t running for Congress.
  • Baker didn’t sign a pledge that "protects those loopholes," since they are in federal law. He took a pledge to oppose and veto any state taxes.
  • Bay State Future is holding Baker responsible for a pledge he didn’t sign.
  • The bill cited by Bay State Future makes no mention whatsoever of jobs overseas.

According to Bloomberg News, the bill at issue "clamps down on what Democrats call the abuse of tax credits for multinational corporations intended to ensure income earned abroad isn’t taxed twice, by both the U.S. Treasury and a foreign government." That is, if a company has headquarters in the U.S. and has operations in a foreign country, then the tax code allows that company to separate income earned abroad from income earned on U.S. soil. The bill would suspend these measures and tax overall income, regardless of where it was earned, in order to send additional aid to states. This, of course, results in a net increase in corporate taxes with no dollar-for-dollar reductions anywhere else, which is why ATR opposed the measure.

But forget all that. Even if the bill did close tax loopholes that "encourage corporations to ship our jobs overseas," it is irrelevant to Baker and the tax pledge he signed.

We expected, as we said in April, that we would see this line of attack "against nearly any Republican House candidate, all but a few of whom have signed the anti-tax pledge in question." But we didn’t expect to see it against a candidate for governor.

And, yes, we were right: House and Senate GOP candidates who signed the pledge continue to get hit with this line of attack. Here are some of the latest examples:

Chris Murphy for Congress TV Ad: "Hide," aired Sept. 30-Oct. 2

[TET ]

Chris Murphy for Congress TV Ad: “Hide”

Announcer: Some politicians try to hide who they are. Sam Caligiuri says he’s a fiscal conservative, but ran Waterbury into financial ruin as a city leader. To cover the mess he passed a 10 million dollar tax increase, the largest in city history. Now Caligiuri is helping his corporate donors by pledging to protect tax breaks for companies that ship our jobs overseas. Sam Caliguiri, a politician who can’t hide anymore.

[/TET]

DSCC TV Ad: "Opposes," aired Sept. 28

[TET ]

DSCC TV Ad: “Opposes”

Announcer: John Raese, he wants to eliminate the minimum wage; failed to pay workers compensation for on-the-job injuries. One thing John Raese does support? A pledge that protected tax breaks for coporations who ship our jobs overseas. It’s true. Protecting tax breaks that reward corporations for sending our jobs overseas. West Virginia working families, we can do better. And we have to. The Democratic Senatorial Campaign Committee is responsible for this message.

[/TET]

Bill Owens for Congress TV Ad: "Moved Here," aired Sept. 28-Oct. 3

[TET ]

Bill Owens for Congress TV Ad: “Moved Here”

Announcer: Matt Doheny moved here from New York City to run for Congress. So what don’t we know about Matt Doheny? As a Wall Street investment banker, Matt Doheny restructured Adelphia Communications. Top executives got thirty-five million in bonuses while he laid off five hundred American workers. No wonder Matt Doheny signed a pledge to protect tax breaks for companies that send jobs overseas. That’s the way they do it on Wall Street.

[/TET]

Kratovil for Congress TV Ad: "Deregulation," aired Oct. 1-3

[TET ]

Kratovil for Congress TV Ad: “Deregulation”

Announcer: The real Andy Harris. His past attacks have been called deceptive. His new attack, false. Harris voted for deregulation, increasing our electric bills by 72 percent. It’s not suprising, Harris always sides with the big guys. He opposes cracking down on Wall Street. And supports tax breaks for companies that ship jobs overseas. Harris even opposed making big insurance cover cancer screenings. Andy Harris’ extreme ideas will cost us.

[/TET]

Denny Heck for Congress TV Ad: "Pledge," aired Sept. 28

[TET ]

Denny Heck for Congress TV Ad: “Pledge”

Announcer: Some ideas are just crazy, like the false, out-of-state attacks against Denny Heck. News media call them misleading. The trusted AARP says the new health care plan would not cut Medicare benefits period. Meanwhile, politician Jaime Herrera pledged to support tax breaks that reward corporations for outsourcing our jobs overseas. Jaime Herra pledging tax breaks for shipping Washington state jobs to China and Mexico? That’s not just crazy, it’s dangerous to our economy.

[/TET]

– by Joshua Goldman and Eugene Kiely

Sources

Jackson, Brooks. "A False Attack." FactCheck.org. 9 Apr 2010.

"What is the Taxpayer Protection Pledge?" Americans for Tax Reform. Undated Web page, accessed 8 Oct 2010. Bay State Future. Undated Web page, access 8 Oct 2010.

IRS. "Bay State Future Notice of Section 527 Status." 13 Sep 2010.

Massachusetts Office of Campaign and Political Finance. "Electioneering Communication Reports." Accessed 8 Oct 2010.

"Taxpayer Protection Pledge (for governors)" Americans for Tax Reform. Undated Web page, accessed 8 Oct 2010.

"Charlie Baker and the Americans for Tax Reform Pledge." Bay State Future. 29 Sep 2010.

Faler, Brian. "U.S. House Set to Pass State Aid as Lawmakers Return From Break." Bloomberg News. 10 Aug 2010.