TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, August 7, 2012

Romney Tax Plan Would Increase GDP by 5.4%, Add 6.8 Million Jobs

John W. Diamond (Rice University), The Economic Effects of the Romney Tax Plan:

There is widespread recognition that the U.S. income tax is a complex, highly inefficient, and costly way of raising revenues to finance government expenditures. In this paper, I analyze a rough sketch of the Romney Tax Plan -- a rate-reducing, base-broadening tax reform. The simulations show that such a base-broadening, rate-reducing reform would have significant positive economic effects on the U.S. economy, including increases in investment, the capital stock, employment, and real wages. These gains are in addition to increases in GDP, investment, consumption, and employment that will occur as the U.S. economy continues to recover from the recent recession and as the population grows. Specifically, I find that the reform would, if passed immediately, increase GDP relative to baseline by 5.4 percentage points over the next decade, while creating 6.8 million jobs.

Political News, Tax | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Romney Tax Plan Would Increase GDP by 5.4%, Add 6.8 Million Jobs:


While I am sympathetic to the supply siders, this is just another **WAG dressed up as scholarship.

**Wild-assed guess.

Posted by: save_the_rustbelt | Aug 7, 2012 12:47:58 PM

Broadening the tax base is Republican speak for taxing the poor and middle class at a higher rate and cutting taxes for the super rich.

It will cause the rich to get richer, and the middle class to get poorer, and bring us one step closer to being the third world Oligarchic kleptocracy of Republican fantasy.

Republicans support the military, police, and prisons because they know violence is the only way to maintain order in the vastly unequal and unjust society they plan to create.

10 more years of Republican rule and we turn into Russia or Brazil.

Posted by: Anon | Aug 7, 2012 2:50:38 PM

This is truly a remarkable, and some might say unprecedented breakthrough in economic research. Despite the fact that the Romney campaign will not release any specifics of his proposal, which the authors acknowledge, these academics are able to model that proposal anyway and reach conclusions that a revenue neutral tax change will have a rather large impact on the economy, even though it raises taxes on lower and middle income workers.

The implications here are stupendous. No longer will quality academic research have to use actual proposals to test the impact of a policy change. To be able to model policy with no knowledge of that policy is surely Nobel Prize level of research.

Posted by: David R. | Aug 7, 2012 5:36:44 PM

Anon forgot to add that Republicans want the poor and middle class to drink poisonous water, breathe dirty air, and die.

Why speculate on the details of Romney's plan? Let's stick with Obama's plan, because it worked! -- Obama: "We Tried Our Plan -- And It Worked."

On second thought, we could double down with Michelle Obama's plan! -- Michelle Obama: ‘Building Our Economy Starts With the Restaurants ...’

Striking a similar theme to one her husband also struck last week, First Lady Michelle Obama said on Friday that President Barack Obama’s tax plan will help build the economy by building up restaurants.

On to November and better restaurants through taxes!

Posted by: Woody | Aug 7, 2012 6:11:20 PM

How about a little more analysis of Romney plan, and a little less propaganda from the DNC, and their uses of class envey when they have no answer to solve this countries economic problems.

Posted by: Jeff W | Aug 8, 2012 4:28:42 AM

Divisive Marxist Class Warfare rhetoric is a good response to any analysis.

Appeals to envy, resentment and grievance have worked to get this Administration elected. Empirically, the Obama Plan has been tested and the people most adversely affected are the "middle class". Worst hit. Taxpayers. Small businesses.

The Free Market, and Limited Government, have raised more people from poverty to the middle class, than any other system including Obama Administration's Stealth Socialism which has enriched a few, connected to the elected, and the rest of us? Not so well. The US is bankrupt thanks to Big Government's Big Spending and massive misallocation of resources. The goal is smaller, limited government. That is the Constitutional Conservative's dream and the vision of the Founders.

Posted by: Bob Guzzardi | Aug 8, 2012 4:50:38 AM

I assume Woody is trying to be sarcastic, but if you look at Republican votes on environmental protection, public transit, universal healthcare, food safety, etc., Republicans do pretty clearly want the poor and middle class to breath dirty air, drink contaminated water, and die younger than the rich.

Or at least Republicans don't mind the little people dying young if it will increase corporate profits or reduce taxes.

And the Republicans have succeeded. The U.S. is the least healthy of all "rich" countries.

Posted by: Anon | Aug 8, 2012 5:19:50 AM

This is great- I remember this academic.... he was the one that said the Bush Tax cuts for the rich would lead to high economic growth and more jobs! Wow! 6.8 Million jobs and 5.4% growth. By the way if you cut me a check for $300,000 I can validate your study.

Posted by: Nick Paleveda MBA J.D LL.M | Aug 8, 2012 7:27:58 AM

Bob Guzzardi

The United States has experienced slower economic growth (GDP PPP per capita) than the social democracies of Europe (France, Germany, etc.) for the last 60 years, the last 30 years, and the last 10 years.

The difference in productivity growth (GDP per work hour) is even bigger. America is less efficient than France, but makes up for it with longer work hours.

European life expectancy has also grown faster, and they surpassed the U.S. in the 1980s.

Look it up.

The Republicans promise growth, but they deliver sputtering economic performance, instability, inequality, and premature death.

Posted by: Anon | Aug 8, 2012 8:07:05 AM

And just so you know, you can see the exact same pattern within the United States.

The most social democratic states--MA, NY, CT, MN, NJ--are the richest and healthiest.

The most Republican states--SC, AR, KS, MS, AL--are the poorest and least healthy.

If you subtract natural resource extraction industries--which have more to do with accidents of geography than with policies--the differences are even starker.

So tell me again about how the Republicans deliver growth and prosperity.

Posted by: Anon | Aug 8, 2012 8:16:52 AM

You're right, Anon. The Republicans vote against "progressive" proposals, not because the proposals lack cost-effectiveness and represent over-regulation by government, which they do, but because the Republicans *want* people to die. Why, if they can't push granny to the cliff to kill her, then they'll stripmine the ground around her to push the cliff to granny. Did you know that Romney is just like Hitler?

Posted by: Woody | Aug 8, 2012 8:26:16 AM

What would be more cost effective than a single tax rate for capital gains and ordinary income, the elimination of the payroll tax, and higher top marginal tax rates?

It would vastly simplify the tax code and tax administration, reduce litigation, increase revenue, and potentially reduce the tax burden for 99% of the population.

Republicans are fine with complexity, as long as it means their clients--the ultra rich--can pay a lower tax rate than the rest of us.

Romney is not Hitler. In fact, he created Romney-care in MA, which probably helped save many lives and improve health.

But at the national level, sensible policies don't fly in the Republican party.

They haven't actively killed millions of Americans--only shaved a few years off of hundreds of millions of Americans lives through obstructionism and neglect. Figure 2 years of shortened lifespan times 300 million americans divided by 80 years of life per person = 7.5 million unnecessary deaths.

They have put 1% of the U.S. population in prison, and started a war that killed between a hundred thousand and a million Iraqis--on false pretenses of WMDs. And they want to do the same thing on a larger scale in Iran. And they have authorized indefinite detention and torture.

So it's a bit much to pretend Republicans care about human life.

Posted by: Anon | Aug 8, 2012 4:50:48 PM


Since disposable income is higher and per capita economic growth is faster in states and countries that have adopted progressive policies, we know those policies are efficient, and more than pay for themselves.

Republicans haven't cared about efficiency since Reagan's star wars program.

It's not that they want people to die. They just don't care if people die.

They care more about the rich having yachts or private jets or servants than about the poor having healthcare or education or a safe way to get to work in the morning.

Because yachts and fur coats and $3,000 handbags and $20,000 custom made suits are efficient, and investing in infrastructure, education, and healthcare is wasteful.

If you only care about the ultra rich, and no one else matters.

Posted by: Anon | Aug 8, 2012 5:15:16 PM

Anon, back up your claims rather than rely on false left-wing attacks. Oh, and let me know who's going to pay for everything that you want, because the one-percent sure can't, especially with this food-stamp president and the nation's growing reliance on government handouts which he's pushing: Over 100 Million Now Receiving Federal Welfare. I take it you've never studied history or economics.

Posted by: Woody | Aug 9, 2012 8:19:55 AM