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August 6, 2012

Analysis: Nine reasons Mitt Romney's tax plan doesn't add up

For openers, it's mathematically impossible for him to keep his promise that the top 1 percent would pay the same or more.

By EZRA KLEIN

The nonpartisan Tax Policy Center bent over backward to make Republican presidential candidate Mitt Romney's promises add up.

They assumed a Romney administration wouldn't cut a dollar of tax preferences for anyone making less than $200,000 until they had cut every dollar of tax preferences for everyone making over $200,000.

They left all preferences for savings and investment untouched, as Romney has promised. They even tested the plan under a model developed, in part, by Greg Mankiw, one of Romney's economic advisers, that promises "implausibly large growth effects" from tax cuts.

The fact that they couldn't make Romney's numbers work even when they stacked all these scenarios on top of one another shows just how impossible Romney's promises are.

The reason Romney's plan doesn't work is very simple. The size of the tax cut he's proposing for the rich is larger than all of the tax expenditures that go to the rich put together. As such, it is mathematically impossible for him to keep his promise to make sure the top 1 percent keeps paying the same or more.

This is going to be a huge problem for the Romney campaign.

The Romney team has tried to paper over the fact that its policy promises don't add up by withholding the crucial details that independent analysts need to do the math. But now independent analysts are filling in those details for them (the Tax Policy Center's look at Romney's tax plan should be read in tandem with the Center on Budget and Policy Priorities (CBPP) effort to flesh out his spending promises). And, ultimately, that's worse, as actors with more credibility than the Romney campaign are showing what the Romney campaign was trying to hide.

Evidence the Romney campaign does not have a good counterargument, part one: If they thought releasing more details would make the plan look better rather than worse, they would have released them rather than letting outside organizations fill in the blanks. It's essentially the same theory as refusing to release the tax returns. But now the Romney campaign is receiving pressure -- including from conservatives -- to release those details, which they know they can't do. And unlike on the tax returns, no one can say that the details of Romney's plans for governing the country are irrelevant to this campaign.

Evidence the Romney campaign does not have a good counterargument, part two: They tried to brush the Tax Policy Center's analysis off as "just another biased study from a former Obama staffer."

That former Obama staffer is Adam Looney, one of the study's three co-authors, who was a staff economist on the Council of Economic Advisers from 2009 to 2010. But William Gale, one of Looney's coauthors on this study, was a staff economist on George H.W. Bush's Council of Economic Advisers.

Plus, the Tax Policy Center is directed by Donald Marron, who was actually a principal on George W. Bush's Council of Economic Advisers. Calling the Tax Policy Center biased is ridiculous. Just ask ... the Romney campaign, which referred to the center's work as "objective, third-party analysis" during the primary.

If Romney tries to pay for tax reform by cutting spending, it becomes much more regressive.

The Tax Policy Center says it is likely that "cutting spending would make the plan even more regressive because government spending tends to benefit low- and middle-income households more than tax preferences do."

In fact, it is almost a sure thing, as Romney has promised to increase defense spending and keep the promised benefit levels for this generation of seniors, which removes almost all the spending cuts that wouldn't particularly harm the poor.

(Continued on page 2)

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