Saturday, September 15, 2012

Romney's "Magic Tax Plan Will Repeal the Math"

Jon Chait at New York mag:
Mitt Romney...has promised to extend the Bush tax cuts and then reform the tax code in such a way as to hold revenue constant, lower tax rates by 20 percent, and close loopholes. This was a vague enough plan that Romney believed he could get by without making any of the ramifications clear, except the good stuff about cutting tax rates. But the Tax Policy Center ran the numbers and found that, even if you granted Romney a series of optimistic to wildly implausible assumptions, he would have to raise taxes on the middle class, by a lot. The rate cuts would lose so much revenue for the rich that there wouldn’t be enough to gain from reducing deductions.

Republicans have been frantically denying the math, which Obama has turned into the potent (and accurate) accusation that Romney’s plan would cut taxes on the rich in order to raise them on the middle class. Republican economist Martin Feldstein tried to defend Romney by doing his own study showing that Romney’s math could work, but in an epic blunder, inadvertently confirmed the charges. Despite cutting all kinds of methodological corners, Feldstein’s study found that the threshold above which Romney would have to raise taxes was not the $250,000 he promised but $100,000 a year. That means Romney would have to raise taxes on a huge chunk of income below $250,000 a year, just as the TPC study found. Feldstein dealt with this problem by writing his column about his study as if it disproved rather than confirmed the TPC, and other conservatives have gone on pretending the same thing...
 TPC examined his promises — cutting rates by 20 percent, not raising taxes on investment income, and not reducing revenue below Bush tax cut levels — and found they could only add up if you raise effective tax rates on income under $250,000 a year. Feldstein found the same thing, despite his partisan attempt to present his finding as a vindication of Romney.
Now Romney is saying he won’t raise taxes on any families earning less than a quarter million. But that just means his plan is completely mathematically impossible. He’s probably safer being attacked for making a series of promises that cannot be mathematically reconciled than being attacked for a specific ramification like raising taxes on the middle class. (Alternatively, Romney could just say he doesn’t care how much revenue he’d lose.)
The basic problem for Republicans is that their highest policy priority is to cut the effective tax rate paid by the richest 1 percent of Americans, but the vast majority of the voters don’t share that goal. Handling that problem is the single biggest challenge the Republican party faces. Normally, when a party has an extremely unpopular position, it just jettisons it. But Republicans care so much about this goal that they won’t give it up, which makes sense — you compromise on your secondary goals, not on your primary goal. Still, this ultimately places them in the position Romney finds himself and Paul Ryan and George W. Bush have found as well — the only way they can get elected is to obscure the real trade-offs and make up a bunch of fake numbers.

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