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Oh, so this is what President Romney would have done on taxes and the fiscal cliff

111312taxbreaks

What would a President Romney have done about the approaching fiscal cliff, not to mention the long-term need for debt reduction? An FT op-ed today by Romney economic adviser (and AEI scholar) Glenn Hubbard may give some clues. The Hubbard Plan is based on two main principles — raise average tax rates on the wealthy not marginal tax rates, and focus debt reduction on spending cuts not tax increases — resulting in several quasi-specifics:

– Limit tax preference benefits for upper-income households perhaps via  caps on the amount of deductions relative to a taxpayer’s income.

– Cut spending over a decade via decreases in the growth of defense and non-defense discretionary spending. Also, increase the retirement age for Social Security benefits

– Decide how big we want government to be and tax accordingly:

The present tax system can raise at most about 20 per cent of GDP in a booming economy. A government of, say, 25 per cent of GDP cannot be paid for by changing rates in such a system. The distortions would be too great. Rather, as in most other advanced economies, a universal consumption tax would be required. (Such a tax would also enable reductions in individual and corporate income tax rates.) An alternative route – superior from the perspective of growth – would be to reduce benefit expenditure over time for the non-poor. This would allow for both a lower tax burden and for investments in education, research and development, and infrastructure.

A few thoughts:

1. Base broadening is not some free lunch. If you leave statutory marginal rates unchanged and scale back tax breaks, you might very well be raising effective marginal tax rates.

2. Not all tax breaks are created equal, and you need to be on the lookout for unintended consequences. Three of the largest tax expenditures are the reduced tax rate on dividends and capital gains, the tax preferences for defined benefit plans, and the tax preferences for defined contribution plans. They tend to promote efficiency and reduce current income tax code’s penalty on saving by treating current and future consumption more neutrally. Base broadening that kills or limits them would damage economic efficiency. Folks shouldn’t be so quick to want to tax capital gains or dividend income as the same level as ordinary income.

3. Here is a nice summary on the way forward by AEI’s Alex Brill and Alan Viard;

Base broadening and statutory rate reductions are not ends in themselves. Like other tax policies, these reforms should be evaluated by whether they promote efficiency, simplicity, and fairness.1 Revenue-neutral base broadening can be useful if it is done properly. Priority should be given to reducing the largest distortions, such as the preferences for employer provided health insurance and owner-occupied housing. Tax preferences should be preserved for work-related costs, and it is particularly important to avoid increases in the tax penalty on saving. In fact, policymakers should consider using part of the revenue raised by base broadening to reduce the tax penalty on saving.

22 thoughts on “Oh, so this is what President Romney would have done on taxes and the fiscal cliff

  1. we’re getting clues NOW that the election is over?

    WTF?

    re: ” Cut spending over a decade via decreases in the growth of defense”

    that’s 180 degrees opposite of adding 2 trillion more in spending for Defense which is what we were hearing from Romney prior to the election.

    Between Romney’s bogus fiscal “plan” and him refusing to kick the racists out of the GOP bed – he was doomed.

    It was a miracle that he finished as well as he did.

    He might actually had even won despite these negatives had the GOP and Romney’s advisers not been so self-delusional about the poll demographics.

    After all is said and done – these folks are unfit to lead the country. The very last thing we need to lead the country is self-delusional types.

    • Larry G, do you ever have an original thought you haven’t copied and pasted from liberal sewer site? Your hero Obama offered no specifics beyond taxing evil rich people and oil companies. As for the racism nonsense, you pasty old liberal white guys will need to figure out a way to keep milking the system if the public ever catches on, or gets weary of your lies.

      • re: ” Your hero Obama offered no specifics beyond taxing evil rich people and oil companies. As for the racism nonsense, you pasty old liberal white guys will need to figure out a way to keep milking the system if the public ever catches on, or gets weary of your lies.”

        but he did Paul. did you hear of the sequester? and unlike ROmney, Obama did NOT propose to INCREASE defense spending by 2 trillion.

        those are the facts guy.

        and no..you don’t need to worry about “pasty old white guys” ..

        you need to worry about Blacks and Latinos.

        when you write them off, you lose.

        that’s dumb.

          • re: increase in spending on poverty programs -

            that’s what happens when you have a recession goofball.

            and as the CRS said.. it started in 2008 and though improving is still not totally recovered.

            Obama cannot spend any more money that Congress approves – or have you forgot?

            oh that’s right.. you’re not concerned with facts…

          • liberal larry g says: “that’s what happens when you have a recession goofball“…

            No liberal larry g, that’s what you parasites want to have happen when you and your ilk can find their way through a job application…

            and as the CRS said.. it started in 2008 and though improving is still not totally recovered“…

            Yeah and the moon is made of green cheese too…

            Obama cannot spend any more money that Congress approves – or have you forgot?“…

            No liberal larry g, that’s what I’ve continually reminded you of about a dozen times but apparently its only just now you find it useful to parrot it…

            You’re right though, the gutless RINOs should kill the budgets on some of these programs…

            Obama’s End Run on Welfare Reform:
            Dismantling Workfare

          • re: who can spend.

            the bottom line is that Obama can only spend what Congress enabled him to spend.

            your “credible” “references” are laughaable.

            The “New Media Journal” ???

            Islamofascism?

            Juandos my boy.. you’re one of those looney’s aren’t you?

            you’re trapped in a country fool of liberals and RINOs!

            :-)

            poor baby…

          • laughable larry g making like a parrot says: “the bottom line is that Obama can only spend what Congress enabled him to spend“…

            Apparently the example I sent you was to complex for you to comprehend…

            The “New Media Journal” ???“…

            Did you in your headlong hurry to flounder and flail uselessly note the Hill link in that posting?

            Islamofascism?“…

            So your grip on reality is as tenuous as I thought…

            you’re trapped in a country fool of liberals and RINOs“…

            Amazing!

          • re: the “example”

            on Congress can provide spending authority.

            that’s the way it works Juandos man.

            your right-wing citations to the opposite don’t bolster
            your position – they undermine it.

            ObamaFascism?

            yep.. that seems to be what attracts you – guy.

            your references are so easy. just look for the anti-Obama pejoratives…

          • laughable larry g enjoying the taste of his foot in his mouth says: “your right-wing citations to the opposite don’t bolster your position – they undermine it“…

            Silly boy since when is the Hill a right wing publication?

            ObamaFascism?“…

            Oh boy! Now laughable larry g is trying to make up new words…

            your references are so easy. just look for the anti-Obama pejoratives“…

            Sign of buyers remorse?

            Really must love the taste of foot, eh laughable larry g?

            Remember wiki isn’t a source, merely a suggestion…

            laughable larry g flailing about in his attempt to defend the indefensible…

            Hilarious!

          • re: the Hill..

            a favorite tactic of you boys is to mix in credible sources with wholly uncredible sources and then to weave a “plausible” scenario.

            but it don’t take long to figure you out guy.

            you’re bogus to the bone ….. and despite your proclaimed distaste of the GOP – you sound much more like them than any one ought to who claims he’s not associated.

          • Oh! Oh! laughable larry g is having another episode: “a favorite tactic of you boys is to mix in credible sources with wholly uncredible sources and then to weave a “plausible” scenario“…

            ROFLMAO!

            Now its reaching feverish pitch for laughable larry g: “you’re bogus to the bone ….. and despite your proclaimed distaste of the GOP – you sound much more like them than any one ought to who claims he’s not associated“…

            LMAO! laughable larry g

            Thanks for chuckle…

            Your fellow delusionistCornel West has some info for you

          • Juandos .. MSNBC is bad.. no question about it – but no worse than FAUX Noise… Hannity is pretty blantant.. O’Relly like to pretend he’s a moderate… but then he gets in a lather and can’t control his impulses and gives himself away.

          • MSNBC is bad.. no question about it – but no worse than FAUX Noise… Hannity is pretty blantant.. O’Relly like to pretend he’s a moderate… but then he gets in a lather and can’t control is impulses and gives himself away“…

            I don’t larry g but if what appears on the internet then you’re lying when you make your inane Fox News comments…

            I don’t know about the full editorial stance of Hannity and O’ Reilly but from what little I see neither one of them are remotely conservative and not worth me wasting my time with for editorial thought…

            Fox News at least is willing to ask the hard questions of this administration unlike the players in the game…

          • Again, juandos, the biggest outlay in Sessions’ welfare study is Medicaid at $400 billion, but 2/3 of that money is keeping Granny in the nursing home. Now you can call Granny a parasite, although it probably will not make her think fondly of the Rs. Asking her to get a job is bit much though, eh?

          • todd says: “Again, juandos, the biggest outlay in Sessions’ welfare study is Medicaid at $400 billion, but 2/3 of that money is keeping Granny in the nursing home“…

            So that’s your rationale for government theft of of an individual’s personal wealth?!?!

            If YOU want to save granny use YOUR money…

            Now you can call Granny a parasite, although it probably will not make her think fondly of the Rs. Asking her to get a job is bit much though, eh?“…

            Who cares what the people think of the Rs, the bastards haven’t been constitutional in their actions for decades?

            I don’t care if granny has to farm out a kidney to support herself, there is NO rationale for the government to extort money from one person in order to give it to another person…

            Apparently that simple concept doesn’t eludes you liberals…

            Also if you think government extortion of wealth from its citizens is about financing some magnanimous gesture to the downtrodden then you’re really out of the (ala larry g) running for a grip on reality…

            Its all about the control…

          • re: ” there is NO rationale for the government to extort money from one person in order to give it to another person…”

            for ANYTHING? including DOD?

    • Between Romney’s bogus fiscal “plan” and him refusing to kick the racists out of the GOP bed – he was doomed“…

      Amazing!

      larry g never passes up an opportunity to say something blindingly stupid…

      Is that really you Chris Matthews using that larr g moniker?

  2. This is the same Hubbard who gave us our current tax structure, which all of a sudden, is defective and apparently “anti-growth.”

    Buy a clue guys- this is semantic horsecrap. For the sake of being able to “claim” that marginal rates weren’t raise, we’re going to limit deductions (as if that were any different than a tax hike) and then claim “tax reform.”

    Hard to believe these are adults. Really.

  3. This is the same Hubbard who gave us our current tax structure, which all of a sudden, is defective and apparently “anti-growth.”“…

    ROFLMAO!

    Good one maxie boy!

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