While so much attention has been turned to Newt Gingrich’s catastrophically mistaken attack on Mitt Romney’s Bain Capital, free-market capitalism, investment, and profits, a potentially much more significant development occurred in the New Hampshire debate Saturday night. For the first time, Mitt Romney embraced a much bolder tax-reform plan.
Under pressure from a number of supply-side conservatives (including me, and most especially the editorial-page folks at the Wall Street Journal), Romney appears to be listening. Here’s his money quote from the debate:
“But I look long term to do just what Jon [Huntsman] indicated, which is to take Bowles-Simpson and to reduce the rates in our tax code, to reduce the number of exemptions, and limit the amount of exceptions that can occur. At the same time, I don’t want to raise capital-gains tax rates, as they do in Bowles-Simpson. But simplifying the code, broadening the base, is the right way to go for our tax code long term.”
So far as I know this is the first time that Governor Romney has endorsed the modified flat tax embodied in Bowles-Simpson. Jon Huntsman, who I think won the Sunday-morning debate in New Hampshire, has endorsed this from day one, with three rates of 8 percent, 14 percent, and 23 percent, plus a corporate tax rate of 25 percent (which Romney shares). The Wall Street Journal labeled this plan “exceptional.” Huntsman would blow out nearly all the deductions and exemptions in the code to properly broaden the base and generate additional revenues along with the revenue-generating growth impact of new incentives.
Up to now, Mitt Romney has been timid on tax reform. His plan has merely been to hold the six-bracket Bush tax plan in place while zeroing out the capital-gains tax for those earning $200,000 or less. Romney’s people have suggested that the former Massachusetts governor would seek real tax reform after he’s elected president. But the Saturday night debate was the first time Mitt actually said it.