romney keeps claiming there are six studies showing his tax plan is sound. as usual from romney this statement is a deception: The Final Word on Mitt Romney's Tax Plan Mitt Romney's campaign says I'm full of it. I said Romney's tax plan is mathematically impossible: he can't simultaneously keep his pledges to cut tax rates 20 percent and repeal the estate tax and alternative minimum tax; broaden the tax base enough to avoid growing the deficit; and not raise taxes on the middle class. They say they have six independent studies -- six! -- that "have confirmed the soundness of the Governorâs tax plan," and so I should stop whining. Let's take a tour of those studies and see how they measure up. The Romney campaign sent over a list of the studies, but they are perhaps more accurately described as "analyses," since four of them are blog posts or op-eds. I'm not hating -- I blog for a living -- but I don't generally describe my posts as "studies." None of the analyses do what Romney's campaign says: show that his tax plan is sound. I'm going to walk through them individually, but first I want to make a broad point. The Tax Policy Center paper that sparked this discussion found that Romney's plan couldn't work because his tax rate cuts would provide $86 billion more in tax relief to people making over $200,000 than Romney could recoup by eliminating tax expenditures for that group. That means his plan is necessarily a tax cut for the rich, so if Romney keeps his promise not to grow the deficit, he'll have to raise taxes on the middle class. Various analyses have adjusted TPC's assumptions in an effort to bring down that $86 billion deficit. But getting from $86 billion down to $0 is not enough to make Romney's proposal work. For Romney's math to add up, he actually needs a substantial surplus of a high-income base broadening above the cost of his high-income rate cuts. This is for two reasons. First, TPC's thought experiment -- eliminate as many deductions as possible at the top while holding those below $200,000 harmless from tax increases -- was not only exceedingly generous in granting Romney's assumptions. It was impossibly generous. Under the terms analyzed by the TPC study, a taxpayer earning $199,999 would face a drastically higher tax bill for earning $1 more in income. That doesn't happen in the real world. Instead you would need to phase in restrictions in deductions on the wealthy, which would reduce the amount of revenue those restrictions generated. Harvard Professor Martin Feldstein, in one of the analyses cited by the Romney campaign, makes a rough estimate that a phase-in would cost about $15 billion. My back-of-the-envelope calculations roughly match that. There is a second reason Romney needs a big surplus for his plan to work. When asked why he won't lay out a specific plan to eliminate tax expenditures, Romney consistently says it's because he can't dictate a plan to Congress and will work with legislators from a menu of options. As he said in last week's debate: I'm going to work together with Congress to say, OK, what are the various ways we could bring down deductions, for instance?. . . . There are alternatives to accomplish the objective I have, which is to bring down rates, broaden the base, simplify the code and create incentives for growth. There are only meaningful "alternatives" to discuss with Congress if Romney can pick and choose from a pool of tax preferences for the wealthy that far exceeds the $250 billion annual cost of his rate cuts for them. If the pool of available base broadeners is just large enough to finance his tax cuts, then Romney actually is dictating a plan to Congress: if they don't eliminate exactly the set of preferences he proposes, his plan will either have to raise taxes on the middle class or grow the deficit. TPC finds that Romney's rate cuts, plus elimination of the estate tax and Alternative Minimum Tax, would cost the Treasury about $250 billion in revenue from high earners. If he could somehow find, say, $300 billion in base broadeners from the wealthy, $15 billion of which would have to go to a phaseout, that wouldn't leave a lot of "alternatives" on the table. Yet there aren't enough base broadeners for Romney to reach the $300 billion level, let alone exceed it. Now, on to the six studies. 1. The strongest of the six analyses is actually one of the shortest: An October 1 blog post from Alex Brill at the American Enterprise Institute. Brill chips away at the $86 billion figure by raising three objections to the TPC study. TPC included in its baseline Obamacare taxes, which Romney did not say he would offset ($29 billion), and did not account for the possibility of eliminating favorable tax treatment of municipal bonds ($25 billion) and life insurance ($20 billion). I think these objections are correct with regard to life insurance and Obamacare taxes, but mostly wrong with regard to municipal bond interest, which should be counted at just $5 billion. This is because the CBO estimates that only about 20 percent of the tax subsidy for municipal bond interest actually accrues to bondholders; the rest goes to state and local governments because bondholders will accept low interest rates on government debt in exchange for favorable tax treatment. If the muni bond tax preference were eliminated, high income taxpayers would pay about $25 billion more in federal income taxes. But they would be relieved of roughly $20 billion in implicit taxes they pay to state and local governments in the form of reduced interest rates on municipal debt, for only $5 billion in actual added taxes. Depending on your assumptions, it may be that the remaining $20 billion in muni bond subsidies effectively flows back to owners of capital generally, though not to municipal bondholders specifically, by inflating the yields on non-tax advantaged investments. If the muni bond tax exemption were repealed and replaced with nothing, this would broaden the tax base. However, it is politically unthinkable that the muni bond subsidy would be repealed without something, such as tax credit bonds, taking its place and producing similar market-wide effects. Consequently, only 20 percent of the proceeds from eliminating the muni bond subsidy should be counted as actual base broadening on high earners. Or if the muni bond subsidy were somehow repealed without offset, a key effect would be state and local governments raising taxes (mostly not on the wealthy) to pay higher interest costs. In total, this leaves Brill about $32 billion short of closing the deficit in the TPC report. Since he also needs about $15 billion to structure a phaseout and tens of billions more to allow Romney to offer a real menu of options to Congress, Brill is well short of "confirming the soundness" of the Romney tax plan. Finally, Brill appeals to the possibility of added economic growth, as do several of the other analyses I discuss below. Tax reform might well produce some added economic growth. But claims about growth induced by tax policy changes are often overstated -- remember, the 2001 and 2003 tax cuts were also sold on the promise of higher economic growth offsetting much of the revenue loss. It didn't happen. (more)http://www.bloomberg.com/news/2012-10-12/the-final-word-on-mitt-romney-s-tax-plan.html
As Yannis admitted yesterday, reps are hoping (there's that word again) that the voters find these facts too esoteric, that is, reps are hoping for voter ignorance, to win this election.
The Final Word on Mitt Romney's Tax Plan Everybody has a problem with the solution. Name a problem. Name a solution. Everyone has a problem with the solution. Any solution. The problem isn;t the problem. The problem is the people who have a problem with the solution. Do nothing = failure. Do something - may or may not equal failure but requires people to act again and again till they get it right and they will.
obama has already proposed a solution. $4 in spending cuts for $1 in new revenue. republicans say nope. we want tax cuts for the rich or nothing.
What is plan B? Face it. Our tax code is fair. If you cut one persons taxes somehow some undeserving asshole ends up with a break too! Give the poor dog a bone and the rich end upwith a bigger bone. It's always sumpin.