Well, we’ve taken a hard look at this plan, and we just can’t make the numbers work. Even when making very pro-Romney assumptions about growth and loophole elimination, we found that the Romney tax plan will radically increase the debt and deficit.
The Tax Policy Center, which is a non-partisan organization, also couldn’t make the numbers work. The TPC concluded the plan is “mathematically impossible” unless Romney raises taxes on the middle class.
Yes, some Romney advocates have argued that the plan will work, but even some of them concluded that the plan would increase taxes on people that Romney considers middle class (those earning between $100,000 and $250,000).
Seeking to head off the Romney surge, the Obama campaign has now put out an ad starring the Democratic “explainer in chief,” Bill Clinton, explaining why Romney’s tax plan won’t do what he says it will do.
- The richest Americans, those making over $3 million a year, will get a $250,000 tax cut
- Middle-class families will get an average tax increase of $2,000
A few problems here, as AEI’s Alex Brill has noted. Both Brother Blodget and President Clinton refer to the Tax Policy Center study which estimates that the Romney plan would a) reduce the tax payments of high-income earners by $86 billion in 2015 and thus b) revenue neutrality would then require an $86 billion tax increase on the middle class.
But that $86 billion is actually just $41 billion when you take into account base broadeners TPC forgot about. And Romney doesn’t count paying for the repeal of various Obamacare taxes as part of his revenue neutrality goal via tax reform. (That would be part of healthcare reform.) So now the gap is down to $12 billion, or just 0.3% of forecasted 2015 revenue. I would call that close enough for government work. Still, even if GDP growth were just 0.1 percentage point faster per year as a result of Romney tax reform, the additional revenue in 2015 would be approximately $13 billion.
Now you could raise legit questions about the political math of the Romney plan, but the policy math works. Let me also add that the U.S. corporate rate is so far on the wrong side of the Laffer Curve that a big rate reduction there could well pay for itself, freeing up the elimination of corporate tax breaks to help pay for individual reform, as happened during the 1986 tax reform. Romney doesn’t factor that in, but I would.
Oh, and the Joint Tax Committee just released a study critical of the idea of paying for lower rates than base broadening. Here’s why it is flawed.