The Obama campaign has been hammering Mitt Romney over an analysis of his tax reform proposal that concluded it was “not mathematically possible” to design a plan that does what Romney says his would do: a) cut tax rates by 20%, b) keep current tax breaks for savings and investing, and c) not increase deficit — at least without cutting other tax breaks so deeply that they result in a net tax increase on middle-income taxpayers.
But two folks from the Tax Policy Center — which coauthored the study with the Brookings Institution — says Team Obama is distorting the study’s findings. First, Howard Gleckman:
… the real question is not whether Romney is proposing a huge middle-class tax increase (he isn’t). It is which of his ambitious campaign promises he will fail to keep. … Romney doesn’t have to raise taxes on the middle-class. He could fix this problem with less ambitious rate cuts on ordinary income, or by raising taxes on capital income. He could pay for his initiative outside of the individual income tax system by increasing corporate taxes—though he says he’d cut them. He could cut spending even more deeply than he’s already promised, though that would hurt low- and middle-income households too. Or he could just add to the deficit.
I don’t interpret this as evidence that Governor Romney wants to increase taxes on the middle class in order to cut taxes for the rich, as an Obama campaign ad claimed. Instead, I view it as showing that his plan can’t accomplish all his stated objectives. One can charitably view his plan as a combination of political signaling and the opening offer in what would, if he gets elected, become a negotiation.
As the saying goes, “No battle plan survives first contact with the enemy.” Even Ronald Reagan had to adjust his tax cut plan once he was elected in 1981.
There two ways to go into a negotiation. One, start with your most defensible offer and stick to it. Two, start with an extreme offer and them begin the process of compromise. Recall Jon Huntsman’s tax plan during the Republican campaign. He supported the “zero plan” of the Bowles-Simpson fiscal commission, as highlighted below:
Huntsman knew that the “zero plan” would only be a negotiating starting point, but it would put special interests who wanted to add back tax breaks in the position of having to justify an increase in marginal tax rates to pay for them. Very smart.