Reynolds’ Rant

In this weekend’s Wall Street Journal, Alan Reynolds accuses us of being lawyers, not economists.  We are guilty as charged.  But the rest of Reynolds’ rant is wrong. 

Reynolds disputes our organization’s estimate that John McCain’s tax plan is worth $3.8 billion to the five largest American oil companies.  He claims that we excluded the oil companies’ deductions and credits from our analysis.  But we did include deductions.  And though we excluded credits — because they are not publicly available — they would have only increased the size of our estimate. 

Our estimate is conservative in other ways as well.  It used 2007 profits, even though oil companies are breaking all the records this year.  It did not count McCain’s big expansion in deductions for business investment.  And it did not include oil companies’ foreign profits. 

We analyzed 200 companies last spring, and our results have been featured in millions of dollars worth of advertising.  None of these companies have disputed our results.  In fact, no one did until Reynolds wrote his column three days before the election. 

Reynolds gets the big things wrong as well.  There is little reason to think corporate taxes put American businesses at a competitive disadvantage.  Corporate tax collections are among the lowest in the world because our code is riddled with special interest deductions, credits and exemptions that shield corporate profits from tax.  While corporate tax reform is overdue, John McCain’s plan would drive up the deficit, shift the tax burden onto middle-class wages, and harm the economy.