The Last Word on Romney’s Tax Plan: It Doesn’t Work
Printer-friendly versionPDF version
a a
Type Size: Small
The Fiscal Times
October 19, 2012

f asked what policies Mitt Romney would enact that are significantly different from those Barack Obama would enact in a second term, I expect that most people will say that Romney will cut taxes, whereas Obama will not. Therefore, we can say that the election is more about tax policy than any other issue.

The first thing to understand is that Romney’s plan would not cut taxes at all, at least in principle. It is a revenue-neutral tax reform. He repeatedly says that he would raise exactly the same amount of revenue after his plan is implemented as would be the case without his plan.

While it is true that Romney says he will cut tax rates by 20 percent, this is not by any means the same as saying he will cut taxes by 20 percent. The revenue lost by lowering tax rates would be replaced by raising taxes by taking away peoples’ tax deductions. Some people will get a net tax cut, others will likely see a large net tax increase.

It is impossible to say who will get a tax cut and who will get a tax increase because Romney won’t say which deductions he will eliminate to pay for his rate cut. Obviously, he knows that there are many people planning to vote for him who wouldn’t if they knew their taxes would rise under his plan.

To prevent this from happening, he talks in broad generalities and emphasizes the 20 percent rate cut, hoping that people will think their taxes will go down by 20 percent when this is clearly not what he is proposing.

As a number of analysts have pointed out, there is no way that Romney can possibly make the numbers in his plan add up is unless he abolishes very popular deductions such as that for mortgage interest, state and local taxes, and charitable contributions. Obviously he would lose a massive number of votes if every homeowner, churchgoer, and resident of a high-tax state thought this would happen. Therefore, exactly what deductions would be eliminated has been kept a secret from voters.

Indeed, there isn’t much support even among Republicans for eliminating deductions necessary to pay for Romney’s rate reduction. The Republican Party platform adopted at the same convention where Romney was nominated says that under no circumstances should the charitable contributions deduction be touched. And just this week, Senator Marco Rubio of Florida, a rising star in the GOP, objected to any tax plan that restricted mortgage interest or the exclusion for health insurance as well.

Said Rubio, “Do you really want to hurt charitable giving in a country when you are saying that you want to rely less on government and more on private institutions to deal with these issues? And how are you going to raise taxes on people on their health care premiums when you are saying you want there to be a system in place where folks can have more control over their own money?”

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.