Governor Mitt Romney and his running mate Congressman Paul Ryan have been working overtime to prove that the legitimacy of their tax plan. But no matter how hard they try, the numbers don’t add up.; no way, no how. And yet sadly, the man who calls himself a business genius and his self-professed numbers genius of a running mate cannot due simple addition and subtraction. But don’t take my word for it, there are many others across the political spectrum who share the same condemning opinion.
For starters, the Romney plan would cut all federal income tax rates by 20%, eliminate the Alternative Minimum tax (AMT), and the Estate Tax. His plan would also keep the Bush level tax rates on capital gains, interest, and dividends, except those with adjusted gross incomes <$200,000, where he would eliminate the taxes on capital gains, interest, and dividends all together. But wait there’s more. Romney will also cut the marginal corporate tax rate from 35% to 25%, make permanent the R&D tax credit, switch to a territorial tax system, and repeal the corporate version of the AMT. The Tax Policy Center in absence of details on deductions from Governor Romney made the following analysis: estimated on a static basis, the Romney plan would lower federal tax liability by about $900 billion in calendar year 2015 compared with current law, roughly a 24 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be about $480 billion in calendar year 2015. That is $5Trillion over 10 years. Yes, $5Trillion.
Team Romney claims the $480Billion loss in revenues would be offset by the conservative talking point of ‘broadening the tax base’. This broadening would be the reduction or elimination of certain deductions; unfortunately, there aren’t enough deductions to offset the tax rate cuts. If ALL taxable deductions were eliminated (a terribly regressive result on middle and lower income people), the Romney plan would be only able to offset a 4%, not 20%, across the board deduction in rates in order to remain deficit neutral.
This is not a leftwing anti-Romney analysis. The nonpartisan Congressional Joint Committee on Taxation ran a similar analysis in 2006, and it made the conclusion that redistribution of individual income tax liability from high wage earners to low wage earners would occur. The JCT rightly states that economic activity would increase, but the question is by how much?
The Wall Street Journal stated that all deductions wouldn’t have to be cut, but instead capping individual taxpayers’ deductions at 17% would provide $3.8Trillion of the $5Trillion gap and the remainder would be made up by increased tax revenue via increased economic activity. Sounds good, but anytime the ‘growth in economic activity’ factor is utilized unpredictability ensues. If this sounds familiar to you, it is because the same calculus was used in 1986 as part of the Reagan Tax Plan, and guess what? It came up short on claims. Reagan adviser Bruce Bartlett noted that over the last 50 years economic activity only increases by tenths of a percentage point and the gains are temporary.
Still not convinced that the plan is dodgy? Conservative columnist Reihan Salam, about as opposite as Diggadug as you can find, said “it’s highly unlikely that a Romney administration would cut the top marginal tax rate as deeply as it has proposed” as middle class taxes would have to go up to prevent the deficit from exploding. Yes even conservatives think the Romney plan is pure fantasy and better found in the fiction aisle as opposed as to the business/economics aisle at your local bookstore.
But Digg, what about the six analyses that Ryan cited during his debate with Joe Biden? Five have already been debunked by further analysis and the sixth? Well that one is Romney’s white paper itself.
So yes, Diggapedia calls Bullshit on the Romney tax plan.