PolitiFact Evidently Forgot That It Already Debunked Romney’s Bogus Tax Claims

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Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.

PolitiFact published a misguided report yesterday giving a “mostly false” rating to the Obama campaign’s claim that the work of two Republican economists, Martin Feldstein and Harvey Rosen, undermines Mitt Romney’s claims about his tax plan. Oddly, last month PolitiFact gave a “mostly false” rating to Romney’s claim that the same studies back up his tax plan. PolitiFact got it right the first time and badly botched this one.

As the nonpartisan Tax Policy Center has found, Romney’s tax plan cannot add up without large tax increases on middle-class households. Feldstein, a Romney advisor, and Rosen, a former George W. Bush advisor, have each recently outlined an analysis purporting to show otherwise. But even though Feldstein and Rosen dispute that Romney’s tax plan would hit the middle-class, the math behind their own analyses simply provides further proof.

The Obama campaign asserted: “Even the studies that Romney has cited to claim his plan adds up still show he would need to raise middle-class taxes…[Feldstein and Rosen] both concede that paying for Romney’s tax cuts would require large tax increases on families making between $100,000 and $200,000.” (Romney says “middle-income” is $200,000-$250,000 and less.)

Politfact writes, “We read both economists’ writings and didn’t see any such claims.” But that simply shows that PolitiFact didn’t read their writings very carefully.

Writing in the Wall Street Journal, Feldstein analyzed a hypothetical tax plan that he claimed would satisfy Romney’s tax promises, and concluded that tax increases would not be needed for households earning less than $100,000. Feldstein didn’t explicitly say that tax increases would be needed for those in the $100,000-$200,000 range, but that was a rather obvious implication. PolitiFact, however, failed to read between the lines:

In an interview with PolitiFact, Feldstein noted that his analysis didn’t separate out data for earners between $100,000 and $200,000. That means the Obama campaign is incorrect to say Feldstein argues that “large tax increases on families making between $100,000 and $200,000″ would be needed.

Though Feldstein tries to hide the ball, the numbers are there for anyone to see. If one applies Feldstein’s own methodology to the publicly available tax data his analysis was based on, it shows a big tax hike for households in the $100,000-$200,000 range.*

Rosen’s analysis also unintentionally proves that Romney’s tax math is impossible. Rosen purports to show that tax reform under Romney’s parameters could potentially (but barely) result in a net tax increase on households earning $200,000 and above, in theory eliminating the need to raise taxes on households earning less than that.

But Rosen’s analysis is based on many implausible assumptions. And it ignores elements of Romney’s plan that favor the rich and would cause a far deeper revenue shortfall, including Romney’s $1 trillion corporate tax cut and his repeal of the estate tax and high-income Medicare taxes. Factoring in these other tax cuts, tax increases on households earning under $200,000 are indeed needed to make the plan add up.**

In assessing claims about Romney’s tax plan, PolitiFact owed it to readers to cut through the Republican economists’ spin and look at the numbers. Had PolitiFact done so, it would have found that Feldstein’s analysis clearly indicates that Romney’s tax plan requires significant tax increases on families making between $100,000 and $200,000, unless he plans to add a substantial amount to the deficit. And it would have found that Rosen’s fatally flawed attempt to make Romney’s tax plan add up only serves to show that it doesn’t.

* Feldstein used IRS data from 2009. If itemized deductions are eliminated for households making $100,000 and above, as Feldstein suggested in his hypothetical tax plan, taxpayers in the $100,000-$200,000 range would lose $332 billion of itemized deductions (more than half of all of the itemized deductions that would be eliminated). That would result in about $83 billion in additional tax, according to Feldstein’s own methodology. Romney’s 20 percent rate cut on the other hand, would only save these taxpayers less than $50 billion (20% of about $230 billion in income tax before credits).

This methodology understates the tax increase on middle-class families in myriad ways. PolitiFact itself identified one way when it previously reported: “The studies from Feldstein and Rosen use 2009 data. That was an abnormal year and one that made it easier to make the math work for the Romney plan.”

** For example, under the unsupported assumption that Romney’s plan would boost incomes by 3 percent (and building upon other implausible assumptions), Rosen’s analysis purports to show that households with incomes over $200,000 could pay a total of $29 billion more than they do now. But the estate tax raised $21 billion in 2009 and repealing it would likely cost even more than that. Romney’s corporate tax cuts would cost about $100 billion per year and mostly benefit wealthy shareholders. And the Medicare tax repeal would cost about $30 billion per year and exclusively benefit households with incomes over $200,000. The bottom line: Since Rosen’s analysis barely gets a hypothetical Romney plan to add up by using shaky assumptions and ignoring major parts of Romney’s actual tax plan, it only serves to bolster what critics have said.