“Never ASSUME, because when you ASSUME, you make an ASS of U and ME”- Felix Unger from the TV version of The Odd Couple
For weeks the Obama campaign talking heads have been claiming that the Romney tax plan raises taxes on the middle class and lowers them on the wealthy.
Earlier this month the president was on the stump and said:
“I want everybody to understand here — he’s not asking you to
pay an extra $2,000 [in taxes] to reduce our deficit; he’s not
asking you to pay an additional $2,000 to help care for our
seniors; he’s not asking you to pay an additional $2,000 in order
to rebuild America or to fight a war,” the president said. “He’s
asking you to pay more so that people like him can pay less.”
Truth is that the Romney plan doesn’t ask anyone rich or poor to pay more taxes. The GOP candidate is proposing to cut tax rates for everyone, across the board. He believes that increased revenues from economic growth, combined with
savings from cutting spending and closing tax loopholes which benefit mostly the highest income taxpayers, would enable a balanced budget in 5 years. For proof of their assertion Obama and the progressives use a study by Brookings-Urban Institute Tax Policy Center which assumes that Romney would have to raise taxes to balance the budget.
Yesterday the Wall Street Journal hit the Bullsh**t button on the Tax Policy Center analysis:
The study’s biggest distortion is its raw assertion that Mr. Romney would refuse to close certain loopholes. In the appendix, the Tax Policy Center lists, among others, two giant tax deductions that it says would go untouched: the exclusion of interest on tax-exempt municipal bonds, and the exclusion of interest on life insurance savings. The study claims that Mr. Romney won’t close these because they are incentives for saving and investment.
One problem: Nowhere do Mitt Romney or his advisers say that these deductions can’t be touched. Senior economic adviser Glenn Hubbard says these deductions are definitely “on the table.” And by the way, the municipal bond interest exclusion mainly serves to encourage states and cities to borrow and spend more, which is the opposite of a saving incentive. Many reform plans dating to Dick Armey’s flat tax in 1995 have recommended eliminating both of these exemptions.
Scholars at the American Enterprise Institute examined what happens to the Tax Policy Center math when this error is corrected. AEI economic research associate Matt Jensen found that “Both of these exclusions largely benefit the wealthy, and, according to the Treasury Department, added together their repeal would net upwards of $90 billion that could be redistributed to lower-income individuals. That would go a long way towards balancing the supposed $86 billion windfall for the rich and tax hike on the middle class and poor, and it could make the impossible suddenly possible.”
The AEI analysis warns that these numbers change from year to year, but it concludes that by eliminating these two deductions and a few other smaller ones, Mr. Romney can make his math add up. In other words, poof, no tax hike on the middle class.
In other words, Romney’s numbers work. But to be clear lets look at the basics of the Romney plan. There was a great (simplified) outline of the plan in American Spectator the other day:
Romney’s tax plan proposes to:
- Extend all of the Bush tax cuts that are scheduled to expire in January.
- Repeal the unfair death tax, which taxes yet again a lifetime of savings that have already been taxed multiple times.
- Repeal all of the Obamacare taxes.
- Repeal the Alternative Minimum Tax (AMT), which was originally meant to stop the richest from avoiding taxes altogether, but which increasingly applies to millions in the middle class.
- Cut income tax rates by one-fifth across the board. So the top rate would be reduced from 35 percent to the 28 percent originally established in the Reagan tax reform. The bottom tax rates, paid by working people and the middle class, would be reduced to 8 percent and 12 percent — even lower than under Reagan.
- Completely eliminate federal income taxes on long-term capital gains, dividends, and interest income for workers earning less than $100,000 and married couples earning less than $200,000.
- Reduce the federal corporate tax rate from 35 percent to a more internationally competitive 25 percent, close to the global average, which would restore international competitiveness for American business. That rate would be reduced further in conjunction with broader corporate tax reform to close the numerous and extensive loopholes.
- Allow a tax holiday for the repatriation of the trillions in profits that corporations have parked overseas to avoid the double taxation they face in bringing the money back to America. Over the long run he would eliminate that double taxation by adopting a system of territoriality, so taxes apply to corporate profits only in the country where those profits are earned. Romney also proposes to make the federal research and development tax credit permanent.
Anybody see the part with increased taxes? Of course not because it isn’t there. The study of the Romney Tax Plan was completed by the liberal think tank Brookings institute and co-authored by Adam Looney. Adam was a senior economist for The Council Of Economic Advisers and an aide In the Treasury Department all under this president.
Just as the progressive talking heads have been making false claims about the Ryan medicare plan during the past 48 hours, they continue to make false claims about the Romney tax plan. They are afraid to tell the public the truth for fear they will understand how wrong Obamanomics have been.