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August 01, 2012 12:32 PM Any Way You Slice It, Romney’s Tax Plan Is Regressive

By Ed Kilgore

It’s more than likely that Mitt Romney will be able to bob and weave and make it to the November finish line without ever being forced to seriously defend his oft-repeated claim that his package of tax proposals would not reduce the share of the federal tax burden on high-income people. But a new analysis from the Brookings/Urban Institute’s Tax Policy Center shows that it’s nonetheless an indefensible claim.

Matt Yglesias provides the big-picture gloss on the study and its implications:

“Revenue-neutral tax reform” is the holy grail of tax wonkery. The idea is to eliminate distorting tax deductions, and use the revenue raised to lower distorting headline rates. In the end the government has the same amount of money and the economy can grow faster. But there’s actually substantial ambiguity around what constitutes a distorting tax deduction.
The 1986 tax reform compromise worked out between Ronald Reagan and congressional Democrats, for example, equalized the tax treatment of investment income and labor income and considered that part of base-broadening. Since 1986, however, we’ve gone back to giving a strong tax preference to investment income and Mitt Romney’s version of tax reform involves keeping those preferences in place. As a new Tax Policy Center analysis shows, with that constraint in place the kind of revenue-neutral tax reform Romney is talking about becomes strongly regressive.

To put it simply, you can’t simultaneously reduce income tax rates across the board while further reducing taxation on investment income (not to mention abolishing taxation of inheritances) and then find anything like enough high-income “tax loopholes” to maintain the wealthiest Americans’ current share of the overall federal tax burden. And that is a problem separate from the virtual certainty that Romney’s tax proposals would enormously expand the federal budget deficit, and/or that the kind of effort (cf., the Ryan Budget) to reduce deficits he has shown he would support would have a devastating effect on the financial bottom line for low-to-moderate income Americans.

So in the unlikely event that Romney is pinned down on his conflicting claims about taxes, how will he react? He’d probably just brazen it out—i.e., he’d lie. Another favorite GOP option is to look at the tax code sideways, excluding inconvenient aspects of it (as Republicans so often do in railing about horrific income tax burden on the wealthy without considering other federal—not to mention state and local—taxes that are emphatically regressive). And then, of course, there are always magic asterisks—fantastic assumptions about economic growth—that can be used to place a big thumb on the scales.

But the reality is that Mitt and his party are committed to fiscal policies that would significantly skew the tax burden towards in the middle and bottom of the income scale, while concentrating “spending restraint” on the same people as well. And why wouldn’t they do so? If wealth is a measurement of “success,” and if success is a measurement of “virtue,” then regressive policies become a moral imperative, and that’s pretty much the unstated overriding goal of today’s conservative movement and GOP.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • c u n d gulag on August 01, 2012 12:52 PM:

    These "moral" people forget a few letters before the word, "moral" - an "a," as in amoral, or "im," as in immoral.

    These people are human sharks - mostly Great 'White's.'
    They have to move forward and eat money, or they feel they'll die.

    And they have none of the redeeming features of the aquatic animal - whose sh*t at least trickles down for the benefit of others.

    I think we need a Great White Shark hunt - on dry land.

  • hells littlest angel on August 01, 2012 12:58 PM:

    Your last paragraph is worthy of a "selah" of its own. Fundamentalist "prosperity theology", mormonism, and republican worship of plutocracy all come together to make it clear that "your betters" are called that because they're actually better than you.

    While Romney can lie like a motherfucker, his inability to hide his contempt for the unprivileged class will be his undoing. He'll hit his peak in the polls just before the right-wing convention, but it will be downhill from there. He'll win nothing outside of the confederate states and states that would have been in the confederacy had they existed in 1860.

  • Peter on August 01, 2012 1:06 PM:

    It's 2000 all over again -- the numbers just don't add up.

  • James E. Powell on August 01, 2012 1:16 PM:

    All the analysis in the world is not going to make any difference. As Bush demonstrated in 2000, you can lie, you can say that 2 + 2 = 5, you can refuse to answer questions about your tax plan and it won't hurt you one bit with voters.

    First, no one in the corporate press/media (see, e.g., Ted Koppel in 2000) is going to read the tax plan or any analysis of it. At best, they will report that 'some say' that it's this, while Republicans say that it's that.

    Second, the belief that Republicans will reduce everyone's taxes while balancing the budget while Democrats will raise everyone's taxes so that they can give free money to [insert racial epithets here] is so firmly embedded in the minds of American voters that neither facts nor thirty years' experience to the contrary will dislodge it.

    Also too, the notion that presidents make tax policy is akin to the belief in Santa Claus.

  • Shane Taylor on August 01, 2012 1:28 PM:

    It is one thing to say that tax subsidies are often excessive and even unjustified (and I would agree), but it's another to describe them "distortions." This term suggests a perfect ideal against which they are judged, specifically an economist's whiteboard fantasy of some spontaneous harmony of interests. So, I think the language in the "big-picture gloss" is prejudiced, because it favors those who claim an esoteric knowledge of some natural order.

    Economic historian Peter Temin made this point with great clarity in this interview:

    "In my opinion, macroeconomics has lost its way. The kind of models that many people use—general equilibrium models—start from assumptions of perfect competition, omniscient consumers, and various like things which give rise to an efficient economy. As far as I know, there has never been an economy that actually looked like that—it’s an intellectual construct. But many people claim that the outcomes of that economy are natural outcomes. When you say 'natural,' you already have an emotionally laden term. Deviations from the 'natural'—say, like, minimum wage laws, or unions, or governments that give food stamps, or earned income tax credits—are interferences with the natural order and are therefore 'unnatural.'"

    http://www.thestraddler.com/20117/piece5.php

  • FriscoSF on August 01, 2012 1:38 PM:

    Sorry

    I can't forget the Obama had OVERWHELMING Majorities at the beginning of his term

    ... And he did NOTHING for Tax Reform
    (or Banking reform or anti-Trust or just about anything else)

    Hope and Change ???

    WHAT will he do if re-elected ?

  • Teaparty Fox on August 01, 2012 1:42 PM:

    Those nice rich people are paying so much and those poor black and brown leaches need to have some skin in the game.

  • c u n d gulag on August 01, 2012 1:48 PM:

    FriscoSF,
    Have you ever heard of "Blue Dog" Democrats - or, as I call them, "Red Dog's" - since there ain't nothin' blue 'bout 'em?

    You are aware that in today's Senate, in now takes 60 votes to get something passed?
    And that, including Lieberman, and Bayh, and the other DINO's, we barely had 60?

    It was in the House where, despite the idiotic Red Dog's, things actually got done - and then went to the Senate to let the Nelson's, and the above-=mentioned (among other) DINO Senators, let thing languish?

    You're either uninformed, or have some sort of other agenda.

    And if you expect "Hope and Change," from Mitt, then be prepared for "Despair and Nihilism."

    If that's what you want, then, by all means, either sit this election out, voter for a 3rd Party candidate, or, vote for the Republicans to "hasten and accelerate" change.
    Only that change will be to some form of Dominionist Christian Fascism.

  • Ron Byers on August 01, 2012 1:49 PM:

    FriscoSF, we don't only watch Fox News around here and we have good memories.

    Isn't Obama's banking reform what the Republicans want to overturn if they are elected? As to tax reform, we were in a deep, deep recession and he pushed reduction of taxes on middle class and poor people. I sort of remember a big tax reduction to put more money in our pockets. The tax decreases were about 60% of the stimulus.

    I know you are hoping for change, but we are hoping Republicans start to think.

  • emjayay on August 01, 2012 1:51 PM:

    Has abandoning the Reagan equal taxation for investment and labor income done anything other than supercharge the incomes of Wall Streeters and increase financial risk taking to the point of crashing the economy?

    Ryan has his famous plan, Romney has his vague and mostly secret plan. Where is Obama's "Lets Go Back to Saint Ronnie's Policies That Brought On A New Dawn of a Golden Age" plan? Wouldn't that probably balance the budget overnight?

    Why hasn't Obama led on lowering the corporate tax rate while balancing it with eliminating tax breaks, so Republicans can shut up about having the highest corporate tax rate on earth, which no one actually comes close to paying?

    I do seem to remember something about tightening rules about the Cayman Islands or something, but that's about it.

  • emjayay on August 01, 2012 1:57 PM:

    I do understand that the Congress could never pass any tax reform except an unreform. But even if nothing happened Obama could be the guy with the good plan to save the economy that Republicans won't let pass.

  • emjayay on August 01, 2012 2:05 PM:

    OK, I actually looked it up. Obama has repeatedly proposed a number of adjustments and policy changes, all in the right direction, and this year added the Volker Rule. But it's never looked like one big comprehensive concept.

  • Stephen on August 01, 2012 2:12 PM:

    So in the unlikely event that Romney is pinned down on his conflicting claims about taxes, how will he react?

    Romney's tax plan will be another addition to the growing list of things that Mitt won't talk about:

    Tax Returns
    Record as Governor
    Health Care plan
    Time at Bain
    Swiss Bank Accounts
    Wife's Horse
    Treatment of family pets

  • Doug on August 01, 2012 8:17 PM:

    Seeing as how Romney is so trusted and beloved by his base, I SURE there aren't any plans to include the Ryan budget (or a reasonable facsmile thereof) in the Republican platform. Let's see the Mittster lie about THAT.
    During the campaign when voters are actually watching...

  • hmmm on August 01, 2012 11:52 PM:

    Can we now say that Mitt Romney would be worse than, not as bad as, Bush?

    I mean, I know he is smarter and more experienced than Bush himself was as a candidate, but that does not matter if he believes in ultra conservative, outdated policies, right to bush, far right to general american voters.

    his mannerism and speeches do not come off as an extremist, so that's a tough sell to moderate democrats and independents.
    But his policies combined with paul ryan are so conservative that reagan would be moderate, hence unelectable by comparison. many retired (thus honest) republicans seem to agree.

    Plus, MaCain and Giuliani don't like him. I don't think he will be a good leader of the party for their sake, either.

  • Anonymous on August 02, 2012 12:06 AM:

    the reason there is no comprehensive tax reform is that it is pretty damn hard to get rid of any tax expenditures. Reagan or Clinton tried a little but it did not go away.
    i think it's politically impossible especially in the recession.

    everyone, left and right, agrees to simplify and raise tax revenues.
    But in reality, so many people and companies relay on these tax credits/deductions too much to get rid of them. some survive on them.

    i think it's more likely if they try to pick and choose small expenditures at one time slowly. frustrating, i know, but it's better than doing nothing.
    but we see how difficult to get rid of even something like corn ethanol subsidies on the current farm bill.

    imagine getting rid of mortgage interests deductions or health care coverage tax deductions? charity deduction? child care credit or education credits?
    green investment tax incentives?

    everyone likes bold ideas until they see the details. so the political calculation goes that it is better to get go back to clinton tax rate gradually, starting with the top 2 brackets than try the impossible than end up getting nothing while looking like a loser.

  • Allison on August 02, 2012 8:39 AM:

    (Snark alert!) The republican plan is to make being poor, or even middle class, more and more uncomfortable. At some point, these poorer folk will begin to finally work harder so that they too can become rich and not have to work as hard... or something.

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