Last week, the nonpartisan Tax Policy Center released the results of a study into the major components of Mitt Romney’s tax plan, which promises voters a 20 percent across-the-board reduction in income tax rates while continuing to produce existing levels of revenue.
Here’s what the TPC found:
“Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower- income taxpayers.”
More specifically, after-tax, take-home income for those Americans making less than $200,000 would fall by an average of 1.2 percent under the Romney plan, while after-tax income for those Americans in Romney’s tax bracket would increase by 4.1 percent.”
Put into graph form, this is how it would look:
The Romney campaign has tried to rebut the findings of the Tax Policy Center, arguing that the Romney plan can’t be assessed accurately because the former Massachusetts governor has refused to release its details. That is simply not true. While Romney has indeed chosen to hide details of his plan, he has made the plan’s basic conceptual framework very clear. He intends to cut tax rates across the board, and to replace that lost revenue by eliminating or reducing major tax breaks.
So let’s look once again at the 20 biggest tax expenditures on the books, as compiled by the Congressional Research Service:
As you can tell, most of those deductions and expenditures — the mortgage deduction, the health insurance deduction — benefit the middle class more than they do the wealthy, which means the middle class would be hurt worse by their elimination or reduction. Compounding the problem, Romney has made it clear that the tax expenditures that benefit the wealthy most, such as a lower tax rate on capital gains than on earned income, would be preserved under his plan because he believes they encourage savings and investment.
In short, your tax expenditures are bad and must be removed, while his are good and must be retained.
Given those parameters, all of which Romney has stated explicitly, it is mathematically certain that taxes would increase for lower- and middle-income Americans while they would fall for Romney’s counterparts.
As TPC concludes:
“… even when we assume that tax breaks –- like the charitable deduction, mortgage interest deduction, and the exclusion for health insurance -– are completely eliminated for higher-income households first, and only then reduced as necessary for other households to achieve overall revenue-neutrality -– the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households.”
In fact, to some Romney supporters, the additional tax breaks for the wealthy contained in his plan are a feature to be celebrated, not a bug to be denied. As William McBride, a conservative economist at the Tax Foundation, puts it:
“In summary, TPC has correctly identified the Romney plan as a tax cut, at least in static terms, that accrues mainly to high-income earners. But TPC fails to acknowledge any of the benefits of Romney’s plan, most pertinently that lower rates combined with a broader tax base should lead to significant economic growth. The benefits of such growth will benefit some more than others, but arguably the currently unemployed will receive the greatest benefit in the form of a job.”
In other words, the Romney is simply a repeat of the Bush plan — trickle-down, Laffer-curve economics of the sort that conservatives have been peddling since the late ’70s. And while the rich have indeed become richer over that time frame, the promised benefits of that strategy have yet to appear.
But hey, maybe next time, right?
– Jay Bookman