"Independent" Analysis of Flat Tax Questionable

BROOKLYN, N.Y. — A few days before Gov. Rick Perry unveiled his flat tax plan, a tiny Brooklyn-based consulting firm sent out an exultant message on Twitter.

“JDA asked to score a presidential candidate's flat tax proposal. We're on it!” said the tweet, sent out at about noon on Oct. 19.

A few days later, JDA — John Dunham & Associates  — bestowed its seal of approval on the Perry tax plan, a seven-page analysis proclaiming the proposal would dramatically increase the size of the U.S. economy and ultimately generate “significantly higher revenues.”

But interviews, company literature and a visit to the firm’s cramped office in Brooklyn suggest the research falls well short of a rigorous or independent economic analysis.

Neither the campaign nor the consulting firm would elaborate on how the study was conducted, but both stand by the results.

Perry campaign spokeswoman Catherine Frazier said Dunham’s study was “independent” and trustworthy.

“We didn’t release the analysis until we knew a thorough and complete analysis was done,” she said. “It is well studied and well researched.”

Company president John Dunham, a former tobacco company economist, told The Texas Tribune he was “honored” to do work for a presidential candidate, but he acknowledged he’s never conducted studies for a political campaign. The firm works almost exclusively for lobbyists, industry trade associations and private companies looking for studies that bolster their case for legislation and policy changes they are trying to advance. He said one of those clients recommended him to the Perry campaign, but he wouldn’t say which.

“We're an economic consulting firm that supports lobbyists,” the company said in its very first Tweet, in late 2009. “Want a legislator to listen? Tell them how much its gonna cost...”

According to a list of “Things We Do” that the firm put up on a MySpace page a couple of years ago, John Dunham & Associates strives to “provide cover and materials to sway legislative votes” and gives “argumentation and the research our clients need to get votes.”

“You want to give them reasons, you can call it cover, but reasons to support an issue,” Dunham said in an interview. “You want to provide reasons and ideas that will try to sway somebody to take your position.”

Besides scoring Perry’s flat tax, JDA’s most recent claims to fame include a study conducted for the American Meat Institute claiming that new regulations would cost the U.S. economy a whopping $14 billion, not the $100 million estimated by the government, and a study for the Beer Institute revealing a $224 billion positive impact from the brewing industry.

Last year the firm also created an online calculator to track the feral cat population on behalf of a national animal rights group. The figures were touted by Missouri-based Spay, Neuter and Protect, or SNAP, which was seeking pro-feral cat policies in Columbia. But the study provoked a minor controversy after experts disputed the figure JDA’s online calculator produced — over 37,000 feral cats, or about one for every three people in the city.

In the study conducted for Perry, later cited by various media outlets and in positive reviews, the firm estimates that under “dynamic scoring,” revenues would exceed Congressional Budget Office figures by as much as $407 billion by 2020. The study says the figures are higher because all the tax savings would be cycled back into the private sector and therefore create the kind of economic growth that then boosts tax collections.

“With increasing demands on the federal government from growing entitlements, higher pension expenses and interest on the debt, it will be necessary to increase the size of the economy — and the tax base — in order to generate significantly higher revenues,” the analysis says. “Table 7 shows how the Perry proposals would do this over a seven-year period.”

Dunham says in the study that he used the IMPLAN system, economic modeling software used to produce complicated statistical analyses based on government data, to analyze Perry's plan. Ambrose Alward, chief technology officer for the company, said the software is not specifically designed for “predictive modeling,” but tax and economic impacts could be estimated depending on what’s fed into it.

“The impact on that is only going to be as strong as the assumptions being put into it,” Alward said.

Neither Dunham nor the Perry campaign would discuss what assumptions were made. The firm said it was instructed to refer all media calls to the campaign, but the Tribune paid a visit to its office in Brooklyn this week.

The company’s tiny office, accessible from a wooden staircase at the back of the lobby, is sandwiched between the first and second floor of an office building at 32 Court Street in Brooklyn. There is no sign on the door advertising John Dunham & Associates. A sheet tacked to the wall beside the door gives the only indication of who’s inside: It shows the floor’s fire plan, and lists John Dunham as an emergency contact.

There are seven people working at the firm. The person responsible for “research and data management” has degrees in music and fine arts, and other staffers have degrees in political science and public administration. Both Dunham and at least one other principal at JDA tout master's degrees in economics, and Dunham said he has conducted hundreds of studies over 25 years in the business.

Hooks reported from Brooklyn. Root reported from Austin.