Friday, August 03, 2012

Romney's numbers just don't add up

By now you have probably head the Tax Policy Center -- which the Romney campaign has oft cited and described as providing "objective third party analysis" -- has attempted to score Romney's tax plan and the numbers do not add up.

Their report is here in pdf.

Romney has cynically boasted that he will not offer any details of his tax plan to ensure that the plan can't be scored.  But on his web site he has outlined a proposal ("Tax: Fairer, Flatter and Simpler") that served as the basis for TPC analysis.  Briefly, Romney has pledged to permanently extend the 2001 and 2003 tax cuts, lower all individual tax rates by 20%, eliminate the Alternative Minimum Tax, the estate tax, and reduce the corporate rate from 35% to 25%.

Romney insist that his plan will be "revenue neutral" (meaning it will not raise any more or any less tax revenue than current law) because lost revenue will be off-set by eliminating the myriad of tax deductions and tax credits that exist under current law.  Romney and TPC call this "broadening the tax base".  We all pay less because all the deductions are gone.

To score this tax plan, TPC gave Romney the benefit of the doubt on every issue and in eliminating deductions to broaden the tax base, started at the top taking all deductions from the most wealthy and going down to lower income levels only as necessary to obtain revenue neutrality. 

TPC is not saying Romney is proposing a direct increase in taxes on middle class Americans. TCP is saying that for Romney's plan to actually be revenue neutral, it would require that those earning less than $200k per year pay on average 1.2% more of federal tax revenues that would result from the ending of tax deductions they now enjoy. Here is their chart:

You may click on the image to enlarge it for easier viewing.

Of course Romney isn't going to raise taxes on those earning less than $200k per year.  He's just going to enact his lower tax brackets while saving key deductions for middle income families, say it will be revenue neutral, and pile further debt on the deceit.

The Romney campaign counters that this analysis doesn't take into account the supercharged economic growth his tax plan will create.  As Matt Yglesias explained,"The problem is that the TPC did in fact consider [supercharged growth], going so far as to use the very tax cut friendly model developed by Harvard economist Matthew Weinzierl in partnership with his colleague Greg Mankiw, an economist, Romney advisor, and Bush administration operative. The numbers just don't add up."

Jonathan Chait does a nice job explaining how TPC embraced Romney's magical thinking with the numbers still not adding up. 

Every Republican presidential candidate since Ronald Reagan has promise tax cuts and promised they would pay for themselves with the growth they spurred.  None of the tax cuts ever paid for themselves and every tax cut has exponentially expanded the deficit.  George W. Bush's tax cuts alone piled $5 TRILLION onto the national debt.

The point of the TPC analysis is to simply demonstrate that Romney's tax plan even assuming his magical thinking, doesn't add up.

Finally, a Republican tax plan gets mathematically analyzed before the election.  This is long overdue.

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