The non-partisan Tax Policy Center last month released a study showing that if Mitt Romney were to keep his promise to cut tax rates by 20 percent while still balancing the budget, he would have to raise taxes on middle class families by more than $2,000. The Romney campaign has disputed the study, saying that it will close enough loopholes to pay for its huge rate cut; however, it refuses to divulge one single loophole that would be on the chopping block.
Notably, the TPC study found that even if Romney eliminated every single loophole and deduction for wealthy taxpayers, he still couldn’t offset the revenue loss without raising taxes on the middle class. During an interview yesterday on NBC’s Meet The Press, Romney claimed that five other studies show that he could, in fact, accomplish all his budget goals:
GREGORY: So Governor, we talked last night about jobs and the economy and also the debt. And I want to begin there. You’ve called the debt and our deficit a moral crisis, and yet in addition to extending the Bush tax cuts, you want to cut tax rates an additional 20 percent. You’ve rejected a 10 to one spending ratio when it comes to spending to increasing taxes. And, yet, you want to balance the budget. The math simply doesn’t add up, does it?
MR. ROMNEY: Well, actually, it does. And the — the good news is that five different economic studies, including one at Harvard and Princeton and AEI and a couple at The Wall Street Journal all show that if we bring down our top rates and actually go across the board, bring down rates for everyone in America, but also limit deductions and exemptions for people at the high end, while you can keep the progressivity in the code, you could remain revenue neutral and you create an enormous incentive for growth in the economy.
The Romney camp hasn’t indicated exactly which fives studies their candidate was referencing, but it seems likely that they were the following. All they do is further prove that Romney would, in fact, have to raise taxes on the middle class if he were to keep his promise not to lose revenue with his tax rate reduction:
— Harvard Professor Martin Feldstein’s, which, as the Center for American Progress’ Seth Hanlon pointed out, didn’t take into account Romney’s corporate tax cut, redefined the middle class, and cherry picked numbers to overstate savings.
— Princeton Professor Harvey Rosen’s, which, as UC Berkeley economist Brad DeLong noted, says Romney’s tax cuts will cause economic growth that every other recent tax cut package has failed to deliver. “We simply do not see such supply responses in the historical record, do we?” DeLong asked.
— American Enterprise Institute’s Matt Jensen’s, who claimed that the TPC study did not take into account that Romney may eliminate “the exclusion of interest on state and local bonds and the exclusion of inside-buildup on life insurance vehicles.” TPC re-ran the numbers to include eliminating those deductions and found that “our main result still holds.” Another AEI tax expert said, “It’s not as if the entire philosophical approach [Romney’s] pursuing is doomed…But he’s going to need to cut rates significantly less than 20 percent if he wants to honor his other goals.”
Since the TPC study first came out, the Romney campaign has flailed for a response. Romney’s effort on Meet the Press was certainly no better.
Feldstein is an official adviser for the Romney campaign, while Rosen worked in the administrations of both President George W. Bush and President George H.W. Bush.