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Erik Paulsen on tax cuts: inflammatory and misleading

State Rep.

State Rep. Erik Paulsen, the Repub nominee for Congress from the suburban 3rd District, made a presentation Tuesday at the University of Minnesota on the need for “forward-thinking leadership” in Congress, especially in light of the financial/economic crisis.

He’s running because “Congress is broken and I really want to help fix it,” Paulsen, of Eden Prairie, a former leader of the House Republicans, told a small audience of about two dozen at the Humphrey Institute.

The focus of his talk is the need for permanent tax cuts and for changes in the educational system — especially to produce more engineers — both of which he argues are necessary for the United States to remain competitive in the globalized economy. He strongly supports global free trade. The failure of the free trade pact with Colombia was a “travesty,” Paulsen said, a strong word choice for the mild-mannered Paulsen.

He doesn’t want to fiddle with the tax code, but wants fundamental changes, dramatic simplification (he doesn’t specify, at least in this presentation, any specific ideas that would simplify it) and he wants these changes to be “permanent,” unlike the Bush tax cuts that are set to expire.

He favors small government and a balanced budget amendment, but doesn’t specify any big cuts he would make to reduce the size of the government. And Paulsen opposes the idea of pay-as-you-go budgeting rules because, for example, they get in the way of tax cuts, like the current drive to revise the alternative minimum tax so it doesn’t affect as many taxpayers.

Aw shucks
Paulsen has a disarming, low-key, aw-shucks presentation style. He smiles, makes no jokes, rings no rhetorical bells and answers questions in a vaguely non-committal way, so that if you listen to the tune, you know what he is saying, but if you read the lyrics, you find that he often hasn’t quite said it explicitly.

He favors continuing all of the Bush tax cuts. When asked flatly whether there is any tax he would raise to help bring down the deficit, any piece of the Bush tax cuts that he would allow to expire, he replies “nothing leaps to mind” but he would consider any proposal on a case-by-case basis, judging such ideas based their impact on job creation.

He believes that the Bush tax cuts, rather than contributing to the deficit, “brought in huge new revenues.” In describing what he calls “the gravity” of allowing the Bush tax cuts to expire, he says it would cost $2,600 for every person in the 3rd District.

This strikes me as inflammatory and misleading, since both parties agree on extending the tax cuts for all but the wealthiest 2 percent or so of Americans, generally those earning more than $250,000 a year. Most Democrats, including Paulsen’s opponent, Ashwin Madia, favor allowing the cuts to expire for those wealthy few, raising the marginal rate on them to the pre-Bush level. Most Republicans favor extending the Bush cuts completely.

The real stakes are dramatically lower than Paulsen suggests, and would directly affect only the wealthiest 1 or 2 percent of families. I asked Paulsen about this after the presentation and he suggested that Madia, earlier in the campaign, actually has favored allowing the Bush tax to expire totally, for all tax brackets. I covered the early stages of this race and I do not remember Madia taking such a position. Paulsen says there is video to back it up.

Madia spokester Dan Pollock says Paulsen is mischaracterizing Madia’s position, but has been using a piece of out-of-context video that creates a false impression. I called the Paulsen campaign and ask for whatever evidence they have on this. So far, none has been forthcoming.

Paulsen also argues that higher taxes even on the top earners can have a devastating effect on job creation because, Paulsen said, “two-thirds” of those earning above $250,000 a year are small business owners. This turns out to be an exaggeration that has been examined and debunked several times, since it is a claim often made by Sen. McCain and Gov. Palin. For example, found that in order to run up the portion of top bracket income tax payers who are “small business owners,” McCain uses a Small Business Administration figure that:

“count as a ‘small business’ anyone who reported as little as $1,000 of business receipts. By that very broad definition, John McCain himself is a “small-business owner,” because his tax return shows Schedule C income from book royalties.”

Most of these “small businesses” do not have any employees.

The Wall Street Journal recently reported that:

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“Only a small percentage of small-business owners take home $250,000 per year, experts say. Only 1.4% of small-business owners would be affected, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.”

The Humphrey Institute’s Center for the Study of Politics and Governance is hosting presentations by the three 3rd District major party candidates this week. Democrat Ashwin Madia spoke Monday. Independence-ite David Dillon speaks Friday.

The race for this open seat to replace the retiring Rep. Jim Ramstad (a Republican for whom Paulsen worked as a young man) has been rated as one of the most competitive in the nation. All rating agencies call it a toss-up. The most recent public poll, by SurveyUSA for KSTP-TV, found Madia with a statistically insignificant lead, thus:

• Madia: 46 percent

• Paulsen: 43

• Dillon: 8.

Paulsen suffered a blow recently when the National Republican Congressional Campaign Committee, which had reserved 66 spots for this week to run 30-second commercial on Paulsen’s behalf, had canceled the plan and was shifting funds to ads on behalf of 6th District incumbent Republican Rep. Michele Bachmann. The crisis for Republican congressional candidates has apparently become so severe that, as Politico said in the headline of a story that featured Paulsen in the lede:

“GOP ditches recruits to save incumbents.”