Liberals have seized on a single study by the Tax Policy Center as proof that Mitt Romney’s tax plan would cut taxes for “the rich” and raise them on the rest of us. The study is a work of wishful liberal thinking.
First, it’s wishful liberal thinking because the study’s authors acknowledge Romney has not laid out his plan in detail. After reviewing Romney’s plans for cutting rates across the board by 20 percent, along with eliminating certain other taxes, the study states:
According to statements by Governor Romney and his advisors, the remainder of the plan will include policies to offset this revenue loss, although there are no details on how that would be achieved. (emphasis added)
Now, it may or may not be a good thing for Romney’s electoral prospects that Romney has yet to explain this part of his plan. It may or may not lead voters to believe his plan would “offset this revenue loss” by getting more money from them, via the closing of certain loopholes and elimination of certain tax deductions and exemptions that favor them. But it is clearly disingenuous to suggest one can demonstrate his unspecified plan would do so.
The study’s authors attempt to do so by making certain assumptions about which loopholes, exemptions and deductions Romney would cut. They justify these assumptions by explaining what it would take for Romney’s plan to be revenue-neutral — under a static scoring system. That’s key: A static scoring system assumes no growth comes about as a result of the policy changes in question.
But as an editorial in today’s Wall Street Journal explains, not only does the historical record not support this key assumption of static scoring. Romney also explicitly does not rely only on base-broadening measures (though the editorial does point out that the Romney campaign “has been explicit in saying that the burden would fall most on higher tax brackets”). As the WSJ notes, his plan also includes an expectation that it would “increase revenues by increasing the rate of economic growth to 4%, up from less than 2% this year and in 2011.”
Now, one might criticize such an expectation as overly optimistic — though one would also have to note that the Obama administration has been (wrongly) forecasting just such a rosy future for 3.5 years now. But even if we accept the argument that Romney’s plan would not produce the growth needed to offset some of the rate cuts, the most reasonable conclusion, given what Romney has said about his plan, is that it would fail to be revenue-neutral. To suggest that the result would instead be middle-class tax hikes is to engage in partisan myth-making.
But that’s not where the wishful liberal thinking stops. The WSJ editorial explains:
Another reality is that more than one-third of Americans pay no income tax. Many in this group contribute payroll taxes, but for most their only connection to the income tax is to receive refundable tax credits (in the form of a check) that are effectively government payments. This is the basis for the Tax Policy Center’s wild claim that the Romney plan raises taxes on those who earn less than $30,000 — a group that now has a negative tax liability.
The claim is that reducing various refundable tax credits that are cash payments from the government are a “tax increase.” By this logic, reducing unemployment benefits or food stamps would also be a tax increase. Even the [Congressional Budget Office] and Congress’s Joint Committee on Taxation acknowledge that refundable tax credits are government outlays not tax cuts. (emphasis original)
So, if one’s income-tax liability goes from, say, minus-8 percent to minus-6 percent, that’s now considered a “tax increase”? If that kind of thinking prevails, Washington truly cannot be fixed.
This wishful-liberal-thinking “study” is an exercise in redefining as many proposals and words as necessary to reach a desired conclusion, not a credible analysis.
– By Kyle Wingfield