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Wednesday, August 1, 2012

TPC: Romney Plan Would Cut Taxes for Rich, Raise Taxes on Middle Class and Poor

Tax Policy Center:  On the Distributional Effects of Base-Broadening Income Tax Reform, by Samuel Brown, William Gale & Adam Looney:

This paper examines the tradeoffs among three competing goals that are inherent in a revenue-neutral income tax reform—maintaining tax revenues, ensuring a progressive tax system, and lowering marginal tax rates—drawing on the example of the tax policies advanced in presidential candidate Mitt Romney’s tax plan. Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.

Romney

http://taxprof.typepad.com/taxprof_blog/2012/08/tpc-romney-.html

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Comments

I don't care much for Romney, but I care a lot less for lying, destructive Democrats.

Gloves Come Off Against Romney Tax Plan

...Obama says that Romney is asking middle class Americans to pay more “so that people like him can get a big tax cut."

Is this a fact? Well … no, it actually isn’t.

...the study points out that Romney’s plan supposedly calls for the elimination of some tax breaks. Which tax breaks? We’re not really sure. So this study decided to guess … and they decided to do their calculations based on the tax breaks which would affect the middle class the most. ....

But here’s what the study completely ignores .. something that Democrats always ignore. History shows that when you cut taxes, tax revenues actually increase! ....

...this “non-partisan,” “independent” study was conducted by none other than a former staffer of none other than Barack Obama. The Weekly Standard observes that the bio of one of the authors, Adam Looney, reads: "Looney was the senior economist for public finance and tax policy with the President’s Council of Economic Advisers and has been an economist at the Federal Reserve Board." And one of the other authors, William Gale, is described as “a close ally of the White House and took part in Treasury Secretary Tim Geithner's ‘Fiscal Responsibility Summit’ in 2009.”....

Posted by: Woody | Aug 2, 2012 7:53:34 AM

I applaud the TPC for eschewing the current law baseline, which I regard as fantasy. TPC’s baseline choice was eminently reasonable. Their conclusions are fair and correct. TPC has written some papers that one could characterize as slanted, but this is not one of them.

I would like to have seen a discussion of how high the elasticity of taxable income would need to be at the $1M level in order to achieve distributional neutrality, but that level of analysis is beyond their scope. It’s also beyond the comprehension limits of 95% of their readers.

Posted by: AMTbuff | Aug 2, 2012 10:18:08 AM

Oops. I take back my positive comment about the baseline. Apparently the future ACA tax increases are part of the TPC baseline. So it's not 2011 policy.

Using that baseline dings Romney for repeal of ACA, which has nothing to do with tax policy. The ACA taxes need to be removed from the baseline for an accurate presentation of tax policy rather than health care policy.

Posted by: AMTbuff | Aug 2, 2012 2:51:59 PM

Unfortunately the facts belies the position that cutting tax rates will raise revenue, as almost all economists including Bush advisers now agree. The idea that revenues will increase is one of those urban myths, one that will just not go away despite the factual evidence against it. Any questions, just look at tax revenues following the Bush tax cuts. Really the data is in all the books.

A second point is that it is true that Mr. Romney has not released any details on his plan, and so that does make it difficult to determine how the impact will be spread. This of course is deliberate, so that Mr. Romney can escape criticism. But the TPC study did the best they could, which was to adopt assumptions that were to the maximum extent possible favorable to Mr. Romney. They determined that even under that scenario Mr. Romney's plan could not be revenue neutral without raising taxes on middle and lower income families.

If someone wants to criticize the TPC study fine, but please do so on a factual, empirical basis. Just because you don't believe the TPC study, or don't like its conclusions doesn't make it wrong.

Of course Mr. Romney could refute all of this by releasing details of his plan, just as he could refute Mr. Reid's accusation that he didn't pay any taxes for the last 10 years by releasing his tax returns. The fact that he will not do either is fairly strong evidence of the lack of veracity of his position. What's the phrase again, "Trust but Verify".

If there is any lying, and I don't think that political spin falls in that category, but if it does it is the position of Mr. Romney that he can cut taxes, increase defense spending and balance the budget. Hm where have we heard that before and how did it turn out?

Posted by: David R. | Aug 2, 2012 4:40:21 PM

Woody: TPC has a long history of staying above the fray, and they employ people with ties to both GOP and Democratic administrations.

I really think it's problematic when we assume that everyone in every job is a partisan. There are a lot of former Bush staffers out there who I would hope could be relied on to count things without an ideological slant, were they hired by a non-partisan, independent body to do so.


Posted by: Liz | Aug 2, 2012 7:47:14 PM

TPC is normally very good about answering questions fairly. They are not nearly as good at choosing which questions to ask. Like the major media, they choose their topics with a noticeable leftward bias.

I believe the TPC can do a better job of maintaining neutrality. It has done better in the past.

Here's a topic that would help: Estimate the distributional effects of a federal default on entitlement promises and debt. This would be less regressive than you might think once you include layoffs of highly paid government employees and contractors. Then for each policy that increases the probability of default by 1%, you could compute a regressivity penalty at 1% of the regressivity of default.

Using such an analysis we could see the danger and folly of short-term stimulus policies that allow the long-term fiscal gap to grow. That's why such analysis will never be done. Nobody on the left wants to illustrate that the free money Ponzi game is nearly over in America, as it already is in Greece.

Posted by: AMTbuff | Aug 8, 2012 10:47:46 AM