Freakonomics Podcast Episode 626

I’m not an economist and I do not have any sort of background in economics either - unless reading the Economist counts as one. In spite of that when I was listening to this episode I could spot the many disingenuous claims that were made. I’ve listened to the freakonomics episodes for many many years now. I’ve also read their books. Nothing they’ve said has annoyed me so much as this episode and the lack of any pushback by Stephen Dubner. Anyway, that was the last episode for me.

But, I do like to challenge my assumptions and opinions. I asked Claude to research the claims. I did not prime it to be slanted one way or the other. The prompt was basically pasting the transcript link and asking it to research the claims. The following is the output in its entirety. Since I don’t think I can do a better job than what Opus did, I’m going to paste it here:

Freakonomics’ “Ten Tax Myths” gets the data mostly right but the framing tilts right

Jessica Riedl’s March 2025 appearance on Freakonomics Radio offers a genuinely useful corrective on some deeply held misconceptions about the U.S. tax system — particularly the supply-side fantasy that tax cuts pay for themselves. But the episode’s 2:8 ratio of conservative-to-liberal myth-busting, combined with its exclusive reliance on a single guest from a Koch-funded think tank and a federal-only tax lens, produces a presentation that systematically understates how the wealthy benefit from the current system. Several of Riedl’s specific claims are well-supported by CBO and OECD data. Others cherry-pick metrics, use outdated figures, or deploy strawman framing. The overall effect is a center-right fiscal conservative worldview dressed up as nonpartisan truth-telling.

The episode (No. 626, aired March 14, 2025) features a one-hour conversation between host Stephen Dubner and Riedl, then a senior fellow at the Manhattan Institute ¹². Based on her December 2024 report “Correcting the Top 10 Tax Myths” ³, the discussion touches every major fault line in American tax policy. Riedl herself described the interview as covering “conservative tax myths, liberal tax myths, deficit reduction, and whether my long Washington DC career as a deficit hawk has been a miserable failure” ⁴. What follows is a myth-by-myth accuracy assessment, followed by an overall framing analysis.

Myths 1 and 2 score well because they challenge conservative orthodoxy

Myth 1: “Tax cuts pay for themselves.” Riedl’s verdict — they almost never do — is accurate and represents overwhelming expert consensus. JCT’s dynamic scoring of the 2017 Tax Cuts and Jobs Act found growth feedback offset roughly 25% of the $1.5 trillion cost, leaving a net deficit increase exceeding $1 trillion over a decade ⁵. CRFB’s January 2025 analysis showed modelers from left and right find dynamic feedback covers at most 14% of the cost of extending the TCJA ⁶. The 2012 IGM Forum survey found 0% of economists agreed tax cuts could be self-financing ⁷. Even N. Gregory Mankiw, George W. Bush’s CEA chair, estimated only about one-third of revenue is recouped ⁸. The academic Laffer curve literature puts revenue-maximizing rates at 60–76% — far above the current 37% top rate, meaning cuts from present levels unambiguously lose revenue ⁹.

Myth 2: “Tax cuts will starve the beast.” Riedl’s claim that the opposite holds — tax cuts coincide with spending increases — is mostly accurate. Romer and Romer’s landmark 2009 study found “no support for the hypothesis” and suggested tax cuts actually increase spending ¹⁰. William Niskanen of the libertarian Cato Institute concluded the theory was neither plausible nor consistent with the facts ¹¹. The historical record is stark: after Reagan’s 1981 cuts, spending rose from 21.6% to 22.2% of GDP; after Bush’s 2001 cuts, spending exploded from 17.6% to 20.2%. The Clinton era provides the strongest reverse case — tax increases in 1993 preceded spending falling to 17.6% of GDP, the lowest since 1966 ¹². One nuance Riedl slightly overstates: the Clinton-era restraint also reflected the post–Cold War peace dividend and bipartisan budget enforcement rules, not tax policy alone. The Tax Policy Center noted that even the TCJA “seems to be feeding” the beast rather than starving it ¹³.

These two myths function as credibility-establishing concessions. Both are positions that mainstream economists — including conservative ones — already largely reject. Their inclusion gives the episode a “both sides” veneer while setting up the far more extensive dismantling of progressive tax arguments that follows.

Myths 3 through 5 are grounded in real data but omit half the picture

Myth 3: “The middle class pays higher tax rates than the rich.” Riedl states that the top 1% pays 33% in combined federal taxes, the middle class 12%, and the bottom roughly zero ¹⁴. On federal taxes specifically, CBO’s most recent data (2019) show the top 1% at about 30% and the middle quintile at 13% ¹⁵ — her numbers are close but slightly overstated for the top. The core claim that the federal system is progressive is well-supported ¹⁶¹⁷.

However, this is where Riedl’s federal-only framing becomes seriously misleading. ITEP’s 2024 “Who Pays?” report shows state and local taxes are starkly regressive: the bottom 20% pays 11.4% of income in state/local taxes, while the top 1% pays just 7.2% ¹⁸¹⁹. When all levels of government are combined, the gap between the top 1% (~34% total) and the middle class (~26% total) narrows from 20 percentage points to roughly 8 points — a vastly less progressive picture ²⁰. The episode never mentions state and local taxes, the “buy-borrow-die” strategy that allows ultra-wealthy families to live off borrowed money and pass assets to heirs tax-free, or ProPublica’s finding that the 25 richest Americans paid a “true tax rate” of just 3.4% when unrealized gains are included ²¹²². Rating: Mostly Accurate on federal taxes, but Debatable as a complete picture.

Myth 4: “Those old 91% tax rates produced lots of revenue.” Riedl’s narrow claim checks out: in 1961, only 446 tax returns nationally reported income in the 91% bracket, and all brackets between 52%–91% raised just 1% of income tax revenue ²³. Income tax revenue averaged 7.2% of GDP in the 1950s versus 8.1% after rates fell ²⁴.

But this framing misses the central insight from Piketty, Saez, and Stantcheva’s influential 2014 research: high marginal rates functioned primarily as a ceiling on executive compensation, compressing the pre-tax income distribution itself ²⁵. The absence of ultra-rich taxpayers in the 1950s data is an outcome of the high rates, not evidence they didn’t work. When corporate taxes are included — and corporate tax revenue averaged 5% of GDP in the 1950s versus just 1.5–2% today — the total effective rate on top earners was substantially higher then than now ²⁶²⁷. Riedl’s “nobody paid it” framing treats a rate designed to reshape behavior as if it were designed merely to raise revenue ²⁸. Rating: Mostly Accurate on the narrow revenue claim, but omits the most important economic function of high rates.

Myth 5: “Europe funds bigger government by taxing the rich more.” The OECD’s own data confirm Riedl’s core claim: the U.S. tax system is the most progressive in the developed world, and most of Europe’s revenue advantage comes from value-added taxes and higher payroll taxes that fall broadly on middle earners ²⁹³⁰. America’s top tax brackets for income, capital gains, corporate income, and estate taxes all exceed OECD averages ³¹.

The critical omission is the distinction between progressivity and redistribution. As CBPP has emphasized, the U.S. does less to reduce inequality through its tax-and-transfer system than virtually every other OECD nation except Chile, Korea, and Switzerland ³². A highly progressive but low-revenue system redistributes less in absolute terms than a moderately progressive but high-revenue one. European nations raise more revenue broadly, but the resulting social benefits (healthcare, childcare, pensions) are worth more in absolute terms to lower earners ³³. The episode frames “most progressive” as though it settles the policy debate, when in fact it’s an artifact of the U.S. simply not having a broad consumption tax. Rating: Mostly Accurate on the data, but the framing oversimplifies what progressivity means for actual outcomes.

Myths 6 through 8 are where the analysis becomes most contested

Myth 6: “Tax cuts for the rich drive soaring budget deficits.” Riedl argues that since 2000, spending rose by 6% of GDP while tax cuts reduced revenue by only 2% of GDP, of which about 0.6% was on the rich ³⁴. The individual numbers are defensible, but the framing is highly contested for three reasons.

First, the year 2000 is a cherry-picked baseline — it was the peak of a historic revenue bubble when receipts hit 20% of GDP, the highest since World War II ³⁵. Using the 50-year average (~17.3% revenue, ~21.1% spending) tells a different story. Second, CBPP’s 2025 analysis using CBO’s own 2012 baseline projections found that programmatic spending in 2025 was actually lower than CBO had projected, while revenue was dramatically lower due to the Bush and Trump tax cuts ³⁶. Third, Riedl’s own Myth 2 analysis undermines Myth 6: if tax cuts politically enable spending increases (as she convincingly argues), then attributing those spending increases solely to the spending side double-counts. The Center for American Progress calculated that tax cuts are responsible for more than 90% of the increase in the debt-to-GDP ratio once COVID and Great Recession one-time costs are excluded ³⁷³⁸. Rating: Debatable — the framing depends heavily on baseline choice and counterfactual assumptions.

Myth 7: “Taxing corporations and millionaires can eliminate the deficit.” Riedl’s core mathematical point has merit: even confiscating all billionaire wealth (~$6.7 trillion at end of 2024) would fund only about 10–14 months of federal spending (not the “8 months” she claims, which appears to use dated figures) ³⁹. A 100% tax on all income over $500,000 would still not close a $1.8 trillion deficit ⁴⁰.

But this is a strawman argument. No serious policy proposal calls for 100% tax rates or one-time wealth confiscation. Actual proposals from Senators Warren and Wyden would raise $300–600 billion annually — not enough to close the deficit alone, but a substantial contribution that Riedl dismisses by comparing reality to an absurd scenario. Progressive economists argue wealth taxation should be one component of deficit reduction, alongside spending reforms and base-broadening. Rating: Mostly Accurate on the math, but the confiscatory framing attacks a position nobody holds.

Myth 8: “Most of the 2017 tax cuts went to corporations and the wealthy.” This is Riedl’s weakest claim. She states that “everybody got their tax rate dropped by about one percentage point” ⁴¹ — but this is specifically contradicted by JCT data, which shows a 0.5 percentage-point reduction for the $20K–$30K group versus a 2.3 percentage-point reduction for those earning over $1 million ⁴².

The Tax Policy Center’s distributional analysis found the top 1% received an average tax cut of ~$51,000 in 2018 versus ~$60 for the bottom quintile ⁴³. More importantly, the individual provisions expire after 2025 while the corporate rate cut is permanent — meaning that by 2027, TPC estimated 83% of the remaining benefit would flow to the top 1%, and 53% of taxpayers would actually pay more than under prior law ⁴⁴. Riedl achieves her “proportional” framing by measuring cuts as a percentage of taxes already paid (a metric that makes small cuts for low-tax-payers look large in percentage terms) rather than as a share of income or in absolute dollars ⁴⁵. Rating: Debatable to Misleading — independent analyses from TPC, JCT, and Brookings consistently show the TCJA is skewed toward higher incomes, especially over time.

The final two myths rely on selective metrics

Myth 9: “Going back to the 1980 tax code means painless deficit reduction.” Riedl cites AEI’s Kyle Pomerleau showing that returning to the 1997 tax code would raise taxes $3,054 for median earners ⁴⁶⁴⁷. This is a credible analysis — without the child tax credit (which didn’t exist before 1997) and with un-indexed AMT parameters, nearly 50 million Americans would lose major tax benefits. The analysis legitimately shows that the tax code has evolved with improvements that benefit middle-class families ⁴⁸.

However, Riedl’s framing obscures that the wealthiest taxpayers would absorb the largest share of any tax increase, both in dollar terms and in percentage-point increases to effective rates. Pomerleau’s own data show the 95th–99th percentile would face the largest effective rate increase (from 23% to 28.1%) ⁴⁹. The implicit suggestion that returning to higher rates would primarily hurt the middle class, rather than restoring more progressive taxation, misrepresents the distributional impact. Rating: Mostly Accurate that going backward is a crude tool, but misleading about who bears the brunt.

Myth 10: “America’s corporate taxes are far below international standards.” Riedl correctly notes the U.S. had the highest OECD corporate rate before 2017 and now sits in roughly the top third of OECD statutory rates at a combined 25.8% (federal plus state) ⁵⁰⁵¹. This is narrowly true for statutory rates among OECD members specifically.

But statutory rates tell only part of the story. ITEP’s study of the 342 largest consistently profitable U.S. corporations found an average effective federal rate of just 14.1% — a third below the 21% statutory rate — with 55 companies paying under 5% and 109 paying nothing in at least one year ⁵². More damning, U.S. corporate tax revenue is just 1.6% of GDP, versus an OECD average of 3.2% — the U.S. raises less corporate tax revenue as a share of GDP than virtually all peer nations ⁵³⁵⁴. Riedl’s inclusion of pass-through business taxes to boost the U.S. comparison is methodologically debatable, since pass-through income is taxed under the individual code and other countries structure similar businesses differently ⁵⁵. Rating: Debatable — statutory rate claims are correct, but effective rates and revenue data tell a starkly different story.

A center-right worldview wrapped in a nonpartisan label

The episode’s most significant problem is structural. Of the 10 myths, only 2 target conservative positions (supply-side self-financing and starve-the-beast), while 8 target liberal or progressive positions ⁵⁶⁵⁷. The two conservative myths debunked are positions that mainstream economists — including conservative ones — already widely reject. They function less as genuine challenges to conservative thinking and more as rhetorical throat-clearing before the sustained dismantling of progressive tax arguments.

Riedl’s professional background reinforces the concern. Her entire 25-year career has been embedded in conservative institutional infrastructure: Heritage Foundation, Senator Rob Portman’s office, the Rubio and Romney presidential campaigns, and the Manhattan Institute ⁵⁸⁵⁹. The Manhattan Institute itself is classified as “Right Biased” by Media Bias/Fact Check, received $3.18 million from Koch-affiliated foundations ⁶⁰, and counts hedge fund billionaire Paul Singer as its board chair ⁶¹. Riedl self-describes as “center-right” and has demonstrated genuine independence — she was reportedly banned from Bush White House briefings for deficit criticism, she calls Trump’s policies “aggressively inflationary,” and in November 2025 she moved to the Brookings Institution ⁶². But independence within a center-right framework still produces center-right framing.

Dubner’s hosting compounds the problem. He introduces Riedl as “one of the few people in Washington willing to tell the truth,” calls her article “borderline thrilling,” and provides minimal pushback on her selective use of federal-only data, the asymmetric myth targeting, or the contested empirical claims ⁶³. No progressive tax expert appears. The episode is, in journalistic terms, a one-source story on a topic where credentialed experts disagree fundamentally about methodology and interpretation ⁶⁴.

What the episode gets right, what it gets wrong, and what it leaves out

The episode delivers a genuinely useful contribution on Myths 1 and 2, where Riedl demolishes supply-side fantasies that even many Republican economists have abandoned. Her alarm about the national debt trajectory — projected to rise from $30 trillion to $200 trillion over 30 years — is substantively sound and shared by nonpartisan analysts ⁶⁵. Her willingness to criticize Trump’s fiscal policies, DOGE’s ineffectiveness, and bipartisan spending irresponsibility reflects authentic intellectual honesty within her fiscal-conservative framework ⁶⁶.

But that framework consistently produces analytical choices — federal-only tax data, year-2000 baselines, confiscatory strawman scenarios, statutory rather than effective corporate rates — that all push in the same direction: minimizing the case for higher taxes on the wealthy and maximizing the case that spending is the sole problem. A listener who trusts the “nonpartisan myth-buster” framing will come away believing the rich pay their fair share and that only spending cuts and middle-class tax increases can fix the fiscal crisis. The reality is considerably more contested than that.

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