Wisconsin Taxpayers Alliance and the Tax Foundation

The Wisconsin Taxpayers Alliance (WISTAX) and the Tax Foundation share similar backgrounds and missions. The Tax Foundation is a Washington, DC-based conservative tax policy research organization that openly advocates for lower taxes and less public investment, while WISTAX is a Wisconsin-based group that conducts and circulates research to advocate for lower taxes and less public investment.

Both groups are fronted, funded, and fueled by conservative activists, and other pro-corporate interests. Often board members will be well-identified major Republican donors. Likewise, both groupsʼ research findings consistently reinforce the conservative, pro-corporate anti-tax policy message.

Additionally, both WISTAX and the Tax Foundation have been accused of manipulating data to reach preconceived conclusions that reinforce eachʼs conservative political and economy philosophies. In fact, WISTAX often borrows facts and figures from the Tax Foundation for inclusion in its own reports.

Most disturbingly, both groups--especially WISTAX--consistently escape the scrutiny and the identification as conservative.

“Tax Freedom Day”

A Trickling Down of Flawed Research

Every year the Tax Foundation announces “Tax Freedom Day.” The announcement allegedly marks the day Americans have “earned enough money to pay this yearʼs tax obligations at the federal, state, and local levels.” However, numerous third-party analyses of the Tax Freedom Day study have concluded that the Tax Foundation utilizes flawed methodology which misrepresents the tax burden facing middle-class and lower-income Americans. Also see the WISTAX Watch report "Total Tax Fallacy" more more information

In its report, “Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens: Figures May Mislead Policymakers, Journalists, and the Public,” the Center on Budget and Policy Priorities (CBPP) scrutinizes the way in which the Tax Foundation analyzes and presents tax data in the “Tax Freedom Day” study

Among the key findings in the CBPP report:

• The Tax Foundation bases its “Tax Freedom Day” calculation on the share of total national income paid in taxes.
• While this figure can be useful for assessing overall revenue levels, it does not represent the share of income that the typical American pays in taxes.
• Because the federal tax system is somewhat progressive, the share of income that most Americans pay in federal taxes is considerably lower than the overall level of revenues as a share of total national income.
• Estimates from the Congressional Budget Office (CBO) show that middle- and even upper-middle-income Americans pay less of their income in federal taxes than the “average” tax burden reported in the Tax Foundation’s “Tax Freedom Day” report. [emphasis added]

The CBPP goes on to caution journalists and reporters against “misusing [Tax Foundation] figures and fostering serious misimpressions about the level of taxes most Americans pay” based on the above conclusions.

In another CBPP analysis of the Tax Foundation study, researchers note:

Of particular concern, the Tax Foundation fails to count some of the income on which the taxes that it counts are levied. It counts capital gains tax payments as taxes but fails to count as income the capital gains income on which these taxes are levied. In addition, the Tax Foundation counts as taxes various items that clearly are not taxes, such as the optional premiums that elderly and disabled people elect to pay for physicians' coverage under Medicare²

The same CBPP analysis criticizes the Tax Foundation for including taxes paid only by high-income earners—such as capital gains income and executive salaries—into a figure that supposedly represents what a typical American pays in taxes.

The Wisconsin Council on Children and Families added additional criticism to the Tax Foundation study, noting “they do not give credit to states for money that is returned to taxpayers, such as Wisconsinʼs $700 million sales tax rebate. All of these flaws in the calculation of state tax burdens distort the figures in the same direction – they all make taxes look higher than they really are.”³

Additionally, in the fall of 2009, the Institute for Wisconsinʼs Future (IWF)--a statewide organization dedicated to tax policy research, community organizing and education policy--criticized a Tax Foundation report that among other things proposed taxing groceries and gasoline, creating a flat tax, and cutting transportation, health care, and education investment by 15 percent each.

The IWF report, “The Tax Foundationʼs Proposals Are Lose/Lose for Wisconsin,”⁴ opened with a scathing critique of the Tax Foundationʼs utterly regressive recent tax proposals outlined in the Tax Foundationʼs annual “State Business Tax Climate Index”:

Imagine this tax package:

1. Charge sales tax on all groceries.
2. Impose sales tax on gasoline, in addition to the gas tax.
3. Eliminate deductions and exemptions from state income tax.
4. Create one income tax bracket so everyone pays the same rate, regardless of income.
5. Abolish all business tax credits.
6. Cut state spending on transportation by 15 percent--roads, bridges, buses, trains, airports and ports.
7. Cut state spending on health care by 15 percent--for children, elderly, the poor, everyone.
8. Cut state aid for education by 15 percent--pre-school, K-12, technical colleges, UW system, employee training.

Interesting proposal: bad for business, the middle class, vulnerable citizens, students and economic growth. Who offers this bizarre plan? The Tax Foundation.

In addition to lambasting the Tax Foundation proposals as pro-corporate, anti-middle class, IWF also criticized the “non-partisan” label the Tax Foundation gives itself, noting the GOP and corporate interests on the Tax Foundation board of directors, and calling the their conservative-agenda driven reports “ideology masquerading as statistics.” Compare that to the “non-partisan” WISTAX board, which is consistently seated with CEOs, former Republican staffers, and corporate tax attorneys who contribute over 90 percent to Republican and conservative candidates.

WISTAX frequently appears in news articles to comment on “Tax Freedom Day” and other Tax Foundation studies, reiterating the conservative anti-tax policy message while ignoring the “serious methodological flaws” and pro-corporate bias of the Tax Foundation. WISTAX has been featured in over two dozen such articles with headlines like “Wisconsin takes dubious honor” and “Tax burden neednʼt oppress.” Todd Berry, president of WISTAX, is often included in these stories to provide further analysis and commentary on Wisconsinʼs taxes and spending as they relate to the Tax Foundation study. Although WISTAX (as well as the Tax Foundation) is consistently labeled “non-partisan,” Berryʼs comments regularly reverberate the conservative anti-tax policy message.

In one such article, Berry calls the Tax Foundation study “consistent with similar kinds of studies that have tried to quantify business climate” and claimed that “the Tax Foundation's annual Tax Freedom Day listing… has proved accurate when compared with outside data.” But while Berry ignored the shortcomings of the Tax Foundation study to promote its accuracy, others remained skeptical. An economics professor at the University of Wisconsin-Madison pointed out in the story that “These kinds of studies sort of try to put a scientific gloss on some underlying agenda… The Tax Foundation has a fairly strong anti-tax agenda." Needless to say, it is with the consistent reverberation from Berry and WISTAX that this anti-tax agenda is picked up in Wisconsin.⁵

In another example, in an article titled “A taxing problem?,” Berry was brought in to comment in a discussion of the Tax Foundation study. Berry again echoed the Tax Foundationʼs anti-tax message saying "(Wisconsin) asks its citizens to work harder in paying their taxes, with an income base that is smaller than the other states.” Bill Ahern, a spokesperson for the Tax Foundation (and former staffer at Americans for Prosperity/FreedomWorks), then continued on to say he and his organization oppose the idea that the wealthiest in the U.S. do not pay their fair share and argued in favor of a flat tax⁶

The obvious conclusion of this is to warn journalists and reporters in Wisconsin against soliciting research and commentary from the WISTAX without serious consideration of the flawed methodology pervasive throughout the research from which it borrows and on which it conducts its own research to reverberate the conservative anti-tax policy message.

Americans For Prosperity-Tax Foundation

Shared company, shared values

Americans for Prosperity (AFP) was founded by Charles G. and David H. Koch and is largely funded by the charitable arms of Koch Industries, the largest privately held energy company in the U.S.. The precursor to Americans for Prosperity was called the Citizens for a Sound Economy (CSE). In 2003, CSE split into two new organizations, with CSE becoming FreedomWorks, and the CSE Foundation becoming AFP. The two organizations share a similar pro-corporate agenda and are at the forefront of the anti-health insurance reform TEA Parties.

In 1989 AFP (formerly CSE) purchased the Tax Foundation. From the Washington Post:

The financially troubled Tax Foundation will cease to exist as an independent entity and its name, publications, library and other assets will be sold to the Citizens for a Sound Economy Foundation, a conservative Washington-based research and education group.

A reconstituted Tax Foundation will operate as a subsidiary of Citizens for a Sound Economy, which said it plans to continue the essential programs of the defunct organization. ⁷

Documents would subsequently refer to the Tax Foundation as an entity “which operates as a separate unit of Citizens for a Sound Economy Foundation.”⁸

The relationship is also reflected in tax filing Form 990 filed throughout the 90s and into the 00s by both the Tax Foundation and AFP. The documents indicate that the two organizations had shared office space at 1250 H Street, Washington, DC. (In 2002, both organizations moved to 1900 M Street, Washington, DC.) The same documents indicate the two organizations shared “certain expenses for office space, personnel and administration.”

Throughout this time, the Tax Foundation and AFP also shared numerous board members and executive directors, including:

• Wayne Gable, a former Tax Foundation executive director (1989-1991) and board member (1991-2008), is a former AFP president and was on the AFP board until 2004. He was also Managing Director of Federal Affairs at Koch Industries is president of two of the three major Koch charitable foundations.
• Dan Witt, a former Tax Foundation executive director (1991-1993) was Director of Membership and Director of Privatization and Transportation at AFP before joining the Tax Foundation.
• James C. Miller, III, former Ronald Reagan Budget Director, was a longtime board of member of both the Tax Foundation (1989-2001) and AFP (1989-2007).

In 2003, AFP split from CSE and started recording a different address than Tax Foundation. And though the relationship has since remained less apparent, AFP’s presence within the Tax Foundation still exists.

Current Tax Foundation President Scott A. Hodge was Director of Tax and Budget Policy at AFP before joining the Tax Foundation as its executive director in 2000. Current Tax Foundation Director of Policy and Communications and publications editor William Ahern worked at AFP before joining the Tax Foundation. Not to mention the aforementioned board members of both organizations.

Two of the three Koch charitable foundations— the Charles G. Koch Charitable Foundation and the Claude R. Lambe Charitable Foundation—are major funders of the Tax Foundation. Various 990s from Koch charitable foundation corroborate the figures below from Media Matters⁹.

Claude R. Lambe Charitable Foundation to the Tax Foundation:

• General operating support: $125,000, 12/31/2007
• General operating support: $100,000, 12/31/2006
• General operating support: $50,000, 1/1/2005
• General operating support: $50,000, 1/1/2004
• General operating support: $50,000, 1/1/2003

Charles G. Koch Charitable Foundation to the Tax Foundation:

• General operating support: $50,000, 1/1/2002
• General operating support: $50,000, 1/1/2001

The Tax Foundation has continued its work with AFP by sponsoring its annual event, the “Defending the American Dream Summit,” for example.

As this screen shot from the national AFP site above shows, the Tax Foundation was a “Silver Sponsor” of the AFP event, which took place in Virginia in the fall of 2009.

Note on the right the line-up of far-right speakers for the event being “Silver Sponsored” by the Tax Foundation: Laura Ingraham, Newt Gingrich, Hugh Hewitt, Jim DeMint, John Shadegg and Michele Bachmann. Also on the roster: Republican Wisconsin Representative Paul Ryan.

Similarly, WISTAX president Todd Berry was a featured speaker at the AFP “Defending the American Dream Summit” in Wisconsin held earlier that year. ¹⁰ AFP billed the event as a place where an individual could “join Wisconsin’s foremost free-market voices, top experts on grassroots mobilization, and Wisconsin’s largest gathering of grassroots leaders from across our great state in a massive show of force for our shared belief in lower taxes and more limited government.” Berry fit in the lineup with other leading conservative speakers such as Paul Ryan, JB Van Hollen, Jim Sensenbrenner, Scott Walker, and Vicki McKenna.

PDF version of this WISTAX Watch report

Endnotes

¹ Avrum D. Lank, “Wisconsin's business tax climate ranks among bottom 10 in U.S.,” Milwaukee Journal Sentinel, October 14, 2004.

² M.D. Kittle, “A taxing problem? Many say system too complex,” Telegraph Herald, April 16, 2006

³ Albert B. Crenshaw, “Research Group Buys Troubled Tax Foundation,” Washington Post, October 10, 1989

⁴ Jack Norman and Karen Royster. Institute for Wisconsinʼs Future. “The Tax Foundationʼs Proposals Are Lose/Lose for Wisconsin.” October 2009.

⁵ Avrum D. Lank. “Wisconsin's business tax climate ranks among bottom 10 in U.S.” Milwaukee Journal Sentinel. October 14, 2004.

⁶ M.D. Kittle. “A taxing problem? Many say system too complex.” Telegraph Herald. April 16, 2006.

⁷ Albert B. Crenshaw. “Research Group Buys Troubled Tax Foundation.” Washington Post. October 10, 1989.

⁸ Tax Foundation. “Tax Features.” January 1990.

⁹ Media Matters. “Whoʼs Funding the Conservative Movement?” 2009.

¹⁰ One Wisconsin Now. “Taxpayers Alliance Head Speaking at ʻMassive Show of Force for Lower Taxesʼ Another Example of Organizationʼs Ideological Agenda.” Press Release. February 25, 2009.