Our guest blogger is Michael Linden, Director for Tax and Budget Policy at the Center for American Progress Action Fund.
2012 GOP presidential nominee Mitt Romney is trying to deceive you, and it looks like he’s getting away with it. He’s outlined a tax plan that would deliver massive tax cuts to the rich, but claims it won’t explode the deficit. He’s promised to implement a broad reform of the tax code, but won’t name even a single special tax break provision he would change.
Finally, he wants you to think he won’t skew the tax code even more heavily in favor of the super-rich, but he hangs that promise on a meaningless statistic. On CBS’ Face the Nation this past weekend, Romney said:
I want to keep the progressivity of the code. One of the absolute requirements of any tax reform that I have in mind is that people who are the high end, whether you call them the 1 percent, 2 percent, half a percent, the people at the high end will still pay the same share of the tax burden they’re paying now. I’m not looking for a tax cut for the very wealthiest.
The trick here is that share of taxes paid is a useless measure of tax progressivity, and promising that the rich will pay the same “share of the tax burden they’re paying now” doesn’t mean that Romney won’t give the rich a huge tax cut.
To see why, just look back at recent history. In the ten years preceding the Great Recession, the share of federal taxes paid by the richest 1 percent went up by almost 25 percent. Does that mean they suffered a huge tax increase? Not even a little. Why not? Because, over the same period, their share of total income went up by more than 30 percent! In other words, their share of income rose faster than their share of taxes. Which means they actually got a big tax cut.
Or take an even simpler example. What if Mitt Romney’s plan was for the richest 1 percent to pay just $1 a year in taxes, and eliminate taxes for everyone else? Why sure, the share of taxes paid by the rich would soar to 100 percent, but I’m pretty confident that still qualifies as a massive tax cut for the very wealthiest.
The fact is that share of taxes paid is much more about the underlying distribution of income than it is about fairness of the code itself. The rich pay more of the taxes because they make more of the money. Last year, the richest 1 percent took home more than 20 percent of all the income in the country, and they paid about 20 percent of all the taxes in the country.
And if the 30 year trend of growing income concentration continues, then simply keeping the “share of taxes paid” by rich people the same — as Romney has promised — would actually mean cutting their taxes. After all, if their share of income goes from 20 percent to 30 percent, but their share of taxes stays where it is, that means they’ll be paying a lot less of their income in taxes than they do now.
And let’s not let the vagaries of all these calculations obscure the simple fact Romney has actually proposed a whole slew of concrete tax changes that would add up to a $250,000 tax cut for millionaires, on top of the $140,000 benefit they get from the Bush tax cuts.