The Final Word on Mitt Romney’s Tax Plan

MayrMeninoCrash

Liberal Psycopath
Dec 9, 2004
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#1
Pretty comprehensive beatdown of what Romney thinks will cure the ills of this country. In short, it's all bullshit.

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 Governor’s 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.

Details of 6 studies truncated for length....see link

Finally, I would note one item that the Romney campaign does not cite in support of its tax plan: Any analysis actually prepared for the campaign in preparation for announcing the plan in February. You would expect that, in advance of announcing a tax plan, the campaign would commission an analysis to make sure that all of its planks can coexist. Releasing that analysis now would be to the campaign's advantage, helping them put down claims like mine that their math doesn't add up.

Why don't they release that analysis? My guess is because the analysis doesn't exist, and the 20 percent rate cut figure was plucked out of thin air for political reasons without regard to whether it was feasible.

(Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.)
http://www.bloomberg.com/news/2012-10-12/the-final-word-on-mitt-romney-s-tax-plan.html
 

Don the Radio Guy

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#4
How's this for an answer? It's not surprising that a liberal think tank disagrees with Romney on tax policy. Now take your little picture and shove it up your mother's cunt.
 

MayrMeninoCrash

Liberal Psycopath
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#7

Don the Radio Guy

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#8
All the little pictures in the world don't change the fact that you posted a story from a group that would be expected to disagree and acted like this is some big bombshell. It's not.
 

Begbie

Wackbag Generalissimo
Jul 21, 2003
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#9
I see your biased progressive "I'm predicting Romney lost the election with that 47% comment!" journalist's nonsense and raise you my common sensical conservative journalist's response...

Josh Barro, Progressive Taxation, and Public Choice

Josh Barro today claimed that the Romney tax plan can't work.
The Romney plan is simple to summarize: Cut income tax rates across the board, then end enough deductions and exclusions (informally, "loopholes") to make it revenue neutral. Plus, the Romney plan is to keep the system at least as progressive as it is today--so the overall tax bill paid by those earning over $200K per year wouldn't change.
The Barro claim is that it's impossible to cut taxes on those earning over $200K per year, make up for it by eliminating deductions and exclusions from that same group, and have the minus and plus sides balance.
The reason? High earners just don't use enough deductions and exclusions: Even if you took away all their home interest deductions, the benefits of deductible health insurance, their child tax credits, and all the rest, it's not enough to make up for a big cut in income tax rates for the top earners. Somebody else would have to chip in.
I won't try to adjudicate this claim--far be it from me to judge IRS data--though I confess I do like Barro's arithmetic. Also, note David's useful post on the debate over the Romney tax plan.
This post is about something quite different.
Here's what this post is about: If Barro is right, the rich are not buying themselves a disproportionate share of tax loopholes.
My inner public choice scholar wonders, "If Barro is right, why aren't the rich getting a better deal from the U.S. government? What does this tell me about the ability of elites to control U.S. politics?"
Barro's post is also another reminder that the U.S. tax system, taken together, is highly progressive by modern standards. Maybe that's partly because American elites have nowhere else to go.
So if the Romney plan doesn't add up, then some people should change their views on progressive taxation and elite control of U.S. politics. Note that I'm not saying they will.
Update: Here's my favorite part of Barro's math: For the over-$200K crowd, taxable income is 82% of adjusted gross income (AGI). AGI is only a rough measure of income (aren't they all?), but this group is paying tax on the vast majority of this income.
For the under-$200K crowd, taxable income is only 55% of AGI. This second group is almost halfway to being lucky duckies, with no taxable income at all.
The excellent Harvey Rosen offers a look at how Romney's tax plan could work (PDF): I like his arithmetic too!
Rosen shows how it could work by scaling back deductions that are well outside the deductions included in Barro's measure. The Rosen proposal (which you should consider illustrative only--it's not a Romney campaign document) would be a massive base-broadening, a massive rise in AGI. It gives a sense of what would have to happen to make it all go. Economics aside, the public choice implications of reducing tax preferences for life insurance are well worth reflecting upon.
Perhaps the Governor would win a battle for a massive base-broadening. As of this writing, Intrade says there's a 39% probability that he'll get to try.
 

Buster H

Alt-F4
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Dec 6, 2004
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#10
How's this for an answer? It's not surprising that a liberal think tank disagrees with Romney on tax policy. Now take your little picture and shove it up your mother's cunt.
lighten up a bit don. I am getting tired of seeing all your posts being reported.
 

Konstantin K

Big League Poster
Aug 25, 2010
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#14
I wonder if we could get Don up to 1,000 reported posts....
 

Don the Radio Guy

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#17
Says the guy that has had nothing but retarded image macros for his avatars the last year or so...
I don't think you're getting the point. My avatars aren't directed at anyone in particular. I don't shoot first, but when you break out your little goalie picture, expect to get smashed like a man. And anyone who reports any post here should be ashamed.
 

Party Rooster

Unleash The Beast
Apr 27, 2005
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#21
I don't think you're getting the point. My avatars aren't directed at anyone in particular.
You really fail to see the hypocrisy of bitching about image memes and having them as your avatar? Wow.

Actually you do. It's frequently your foot though.

And you're not the only one that the goalie pic is for you narcissistic idiot. You were the inspiration though...

but when you break out your little goalie picture, expect to get smashed like a man.
A "your mother's cunt" post is a "smashing?" Maybe in ninth grade.
:haha7:
And anyone who reports any post here should be ashamed.
The only posts I've ever reported around here have been of the spambots.
 

MayrMeninoCrash

Liberal Psycopath
Dec 9, 2004
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#22
I see your biased progressive "I'm predicting Romney lost the election with that 47% comment!" journalist's nonsense and raise you my common sensical conservative journalist's response...
A reasonable rebuttal, but again the big fallacy is that the plan depends on economic growth to be successful. It's like saying, I bet the Yankees will win tonight if you give me a (+12) score advantage. Nothing in the plan itself will spur growth any more so than the Obama and Bush plans spurred it. In fact, what happens to the weak housing market if Romney does eliminate the mortgage deduction? Show me how his plan will be revenue neutral under the current economic conditions, and/or show me how this plan would be any simpler to the average taxpayer than what we currently have.
 

Myhairygrundle

Screw you guys, I'm going home.
Jul 16, 2005
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#23
The Feds could confiscate all the *wealth* of the super rich and it's a drop in the bucket compared to the debt.

Flat tax=fair tax.

The only way to reduce the debt is drastic cuts in spending.
 

BIV

I'm Biv Dick Black, the Over Poster.
Apr 22, 2002
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#24
Be careful with the racial slurs! Someone might report you!

I shouldn't even joke about it. It really is disgusting that someone is doing that.

Reported.