Don’t automatically hold Mitt Romney to his promise of trimming income tax rates for everyone by 20 percent, one of the few specifics and defining principles in his plan for jumpstarting the sluggish economy.
Romney has pledged that, if elected, he will enact revenue neutral tax reform that would slash all tax rates across the board while offsetting the cost by eliminating a raft of costly but highly popular tax deductions and writeoffs. But if Congress refused to eliminate many of those tax breaks, he would have to scale back the size of the tax cuts, a campaign adviser said on Monday.
The comment emerged less than a day after the Republican presidential nominee appeared on CBS's “60 Minutes” touting his plan to lower rates, curtail deductions without pinching the middle class, and still put the country on a path to reducing the deficit. Other than the 20 percent figure, Romney has yet to really flesh out the proposal, telling the news show, “The devil's in the details. The angel is in the policy, which is creating more jobs.”
But once in office, Romney would likely keep the deficit in check and minimize the tax burden on the middle class than stick to that hard target of 20 percent, said Kevin Hassett, a senior fellow at the American Enterprise Institute who represented the campaign at a debate hosted by the National Association for Business Economists in Washington, D.C.
An economics PhD who also advised the presidential campaigns of George W. Bush and Arizona Sen. John McCain, Hassett was responding to an August analysis of Romney’s proposal by the non-partisan Tax Policy Center that he fumed was “the most partisan thing to come out of a think tank in my lifetime.”
The study, quickly incorporated into President Obama’s stump speeches, found that the Romney plan would actually increase the tax burden for Americans earning less than $100,000. In order to prevent the deficit from skyrocketing while also slashing the top rates from 35 percent to 28 percent, a 20 percent reduction, Romney would have to “broaden the base” by slashing $360 billion worth of tax incentives like the popular mortgage interest deduction and charitable tax writeoffs.
Hassett claimed Romney “would have to change the rates” if a deal can’t be brokered on the politically sensitive deductions. "He believes he can get to 28 percent,” the economist heatedly declared during the debate at the National Press Club. “When he’s in office he will try to do it. But if Congress won’t give him the base broadening that he needs to get to 28 percent, there is no way in hell that anybody believes that he’s going to increase taxes" on the middle class.
The Romney camp quickly disavowed the statement and said there was no need to prioritize the different planks of his initiative.
“The governor’s plan calls for a 20 percent rate cut for all brackets, revenue neutrality, while ensuring that high-income earners continue to pay at least the same share of taxes,” campaign spokesperson Andrea Saul told The Fiscal Times. “All of these goals are achievable, and the governor will work with Congress to enact tax reform that meets each of the goals he has proposed.”
At yesterday’s debate in downtown Washington, Harvard University economist Jeffrey Liebman, appearing on behalf of Obama, offered a blunt rebuttal. “It’s completely irresponsible for a candidate for president, Mitt Romney, to propose a massive tax cut targeted to the rich and not be willing to name a single tax expenditure that he would get rid of to pay for it,” said Liebman, who served as chief economist in Obama’s Office of Management and Budget.
After a politically disastrous week of adverse publicity about his surreptitiously videotaped comments about not worrying about the “47 percent” of Americans who pay no income taxes, who are dependent on government and would never vote for him, Romney has been in full damage control mode.
“Not everything I say is elegant,” he said during the interview with “60 Minutes,” which preceded a sit-down on the show with Obama. “And I want to make it very clear. I want to help a hundred percent of the American people.”
When CBS correspondent Scott Pelley asked which deductions Romney would eliminate to pay for his tax plan, the candidate answered, “That's something Congress and I will have to work out together.”
The former Massachusetts governor said he would consider means testing for Social Security and Medicare benefits for future retirees. He also put considerable distance between his plan for revamping Medicare as a voluntary voucher program and the proposal by his running mate, Rep. Paul Ryan of Wisconsin, to cut Medicare funding by more than $700 billion – similar to cuts Obama has recommended.
“Yeah, he was going to use that money to reduce the budget deficit,” Romney said of the Ryan plan. “I’m putting it back into Medicare, and I’m the guy running for president, not him.”
Romney was sharp in his criticisms of Obama’s policies, but there was nothing combative in his tone or demeanor – unlike some of the exchanges Monday during the debate between the campaign surrogates at the National Press Club. It was a mix of anger and high-level math that voters almost never see. Hassett practically seethed over the analysis by the Tax Policy Center: “I just can’t believe that the Obama campaign would say that and that an economist for the Obama campaign would be up here repeating these stupid and inane talking points.”
Liebman, the former Obama administration official, argued that Romney’s proposals for tax cuts, increased defense spending, deep reductions in domestic programs and no new tax revenues doesn’t add up and will lead to more trillion dollar a year deficits down the road. “We know how this movie turns out,” he said. “Massive deficits.”
Hassett lashed back at Obama’s budget proposal to save an additional $4 trillion in the coming decade because it counted savings from the end of the wars in Afghanistan and Iraq. “The biggest fraud I have ever seen in American politics,” he sneered.