When it comes to fiscal policy proposals, the devil is in the details. Budgets require numbers to work, placing them somewhat outside the typical reality distortion field of the campaign trail and offering a rare chance to objectively analyze the substance of a candidate’s ideas. At the end of the day, the math has to work. Which perhaps explains why Mitt Romney’s tax plan—which promises to simultaneously lower taxes, eliminate deductions and reduce the deficit—is so short on any details that could complicate or invalidate its incredible premise.
Romney himself has admitted that “it’s kind of interesting for the groups to try and score it, because frankly it can’t be scored,” leaving journalists and think tanks in the dark as to how he could possibly lower taxes without growing the deficit or raising taxes elsewhere. But thanks to a report released last week by the Brookings Institution and the Tax Policy Center, we now know that obfuscation was precisely the point. Even their purposefully favorable treatment of Romney’s plan reveals his promises to be mathematically impossible.
The Tax Policy Center analysis begins by assuming that Romney would first eliminate all tax deductions for the rich, except those he has already promised to preserve, such as the preferential treatment given to investment income. But the total amount of revenue available from tax deductions for the rich is still less than the revenue that would be lost by cutting tax rates. For his plan to remain revenue-neutral as promised, Romney would therefore have to continue eliminating deductions all the way down the income distribution. In practice, this results in a net tax increase on all taxpayers with income below $200,000 of 58 percent—an average $500 tax increase for 95 percent of Americans and an average $2,041 increase for families with children.
That $86 billion shift in the tax burden—from the top 5 percent to the bottom 95 percent—is the most progressive possible result of Romney’s proposal. Again, it assumes (quite generously) that a Romney administration would aggressively cut benefits for the rich before proceeding to deductions for the middle class, like mortgage interest, employer-provided health care, education, medical expenses and child care.
What’s more, those numbers are based on Romney’s own model for economic growth, which assumes lower taxes on the rich would generate significant job creation and higher revenues. If you take away Romney’s “dynamic scoring” model, the tax increase facing the poor and middle class would need to be even higher. And all this assumes the Bush tax cuts are made permanent. Against a current law baseline (wherein the Bush tax cuts and other temporary tax breaks expire next year), the chance that Romney’s tax cuts are revenue neutral drops effectively to zero.
But maintaining revenue levels was never the point for establishment Republicans, as keen observers of the Bush administration will remember. What the Tax Policy Center analysis reveals is that unless Romney and his advisers intend to commit political suicide by raising taxes on 95 percent of the population, their real plan is to double down on the fairy tale logic of the Bush years: cut taxes, raise deficits, and wait for the magic of trickle-down growth to kick in.