Everybody wants details about the Romney-Ryan tax plan, almost as much as we want to see Romney’s own secret tax returns. Well, the Romney campaign still refuses to say much about the plan, but today they told Roll Call that a 2006 Joint Committee on Taxation (JCT) analysis (PDF) of a “Romney-style tax plan” proves they are not lying about a revenue-neutral proposal to lower marginal income tax rates.
The JCT analyzed a less than 10 percent income tax rate reduction (compared to Romney’s proposed 20 percent), and said it could work assuming that nearly all middle class tax breaks — including those for children, mortgages, and employer contributions for health care — are repealed in their entirety. The study also found that such a plan would result in the “redistribution” of income tax liability from high-income earners to the middle class.
The Tax Policy Center has analyzed the Romney plan. And even when they assumed Romney’s optimistic estimates of economic growth, they determined that the math still doesn’t work.
Benn Steil and Dinah Walker of the Council on Foreign Relations created this handy graph of the ten biggest tax expenditures under our current system:
The red bars indicate items that Romney and Ryan had previously promised not to touch: exclusion of employer contributions for health care, deductions for mortgage interest, reduced tax rates on dividends and long-term capital gains, and deductions for charitable giving. These four items constitute a massive 30% of the $1.1 trillion. Therefore the Ryan pledge to cut loopholes and deductions cannot, mathematically, be worth more than $770 billion.
And note some of the other big-ticket “loopholes and deductions” on the list. Social security and other retirement income constitute three of the top ten items, together making up 13% of the total, and the earned income credit, which benefits the poor, represents another 5% of the total. Would Romney and Ryan eliminate those deductions? We’ll speculate here: no. A quick skim of the remainder shows that few of these items constitute “loopholes” in the public’s mind – they are items few imagine could or should be taxed.
Sensitive to the charge that his numbers are not adding up, Romney proposed at Tuesday night’s presidential debate capping deductions at $25,000. This would raise $1.3 trillion in revenues over the next ten years, according to the Tax Policy Center. But that figure is only slightly above what Ryan said they would raise each year. A $1 trillion a year hole remains in their budget math.
In other words, Romney’s plan would add $1 trillion a year to deficit spending unless he can convince Congress to raise taxes on the middle class to pay for more tax cuts for the rich.
UPDATE: Fox Business host Stuart Varney admits that Romney’s tax plan is mathematically impossible.