Mitt Romney’s tax plan would raise taxes on all but the top 5 percent of earners, according to an analysis by the non-partisan Tax Policy Center.
“Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers,” the report said.
According to the report, Romney’s insistence on “revenue-neutral” tax cuts, in addition to his stated goal of cutting tax rates while eliminating deductions, would inevitably lead to significant tax cuts for wealthy Americans, which necessitate tax increases for the vast majority of Americans.
The report said that the results held under any analysis of possible options, even ones in which deductions that favor the wealthy, were eliminated before any other cuts and deductions were put into place.
“Even when we assume that tax breaks – like the charitable deduction, mortgage interest deduction, and the exclusion for health insurance – are completely eliminated for higher-income households first, and only then reduced as necessary for other households to achieve overall revenue-neutrality — the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households,” the report said.
The Romney campaign dismissed the report out of hand.
“That report you referenced is a joke,” said Eric Fehrnstrom, a senior adviser to Romney, according to Politicker. “It was co-authored by a member of the Obama White House, someone who was part of the White House economic team. And the study doesn’t take into account important aspects of Governor Romney’s plan which will have a positive, pro-growth impact on the economy.”
The report was co-authored by Adam Looney, who worked as a staff economist for the Council of Economic Advisers from 2009 to 2010. Another co-author of the report, however, was William Gale, who was a staff economist for the Council of Economic Advisers under President George H.W. Bush. The Tax Policy Center itself is directed by Donald Marron, who served on the Council of Economic Advisers under President George W. Bush.
The Tax Policy Institute anticipated the Romney campaign’s other objection, that the changes in tax policy would spur significant economic growth which would change the calculus of the study.
“[E]stimates indicate that the effects of tax rate reductions on the macroeconomy are likely to be small or even negative, at least, over the typical 10-year budget window,” the report said. “At the end of the day, the net effects on labor supply and saving behavior would likely be small.”
The report is a serious blow to Romney, who has painted himself as more of a tax-cutter than President Barack Obama. In responding to the report, Fehrnstrom claimed that “President Obama is hostile to job creators in word and deed. He derides small business by telling them they didn’t build that and he wants to raise taxes on job creators. So that’s our reaction to the Tax Policy Center’s study.”
The report, however, suggests that Romney would raise taxes on many job creators, and indeed, the vast majority of Americans.
The Tax Policy Center is a joint venture of the Brookings Institution, a center-left think tank, and the Urban Institute, a non-partisan think tank.
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