The Obama campaign says that Mitt Romney plans to raise taxes on the middle class and cites a study from the Tax Policy Center as evidence. Given that the only sets of eyes that have seen the Romney tax plan in detail reside in the skulls of Mitt Romney and his closest advisers — if indeed Romney has finalized his thinking on the issue, which he probably hasn’t — such analysis is at best speculative. That fact is clear at least to the gentlemen at the Tax Policy Center, who have written that if Romney’s final plan does indeed, as he has suggested, eliminate preferential tax treatment on some specific investments — namely interest accrued on life-insurance policies and municipal bonds, both tax-free under current law — then, in the authors’ own words, “an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral.” The Obama campaign is attributing to the TPC study a certainty that its authors do not share, an act of dishonesty.
Which is to say, the Obama campaign has added an imaginary tax-hike plan to the fictitious war on women. By November, we fully expect them to be all over the airwaves denouncing Mitt Romney’s plan to exile the Easter bunny to Guantanamo Bay.
Romney is a nuts-and-bolts details man, and he is also prudent. He has laid out his tax plan in very broad strokes communicating his guiding principles, which are to make the tax code flatter and simpler. To that end, he proposes lowering all tax rates by 20 percent and offsetting the forgone revenue by eliminating certain tax breaks for high-income taxpayers, and lowering and reforming business taxes. The TPC study argues that there are not sufficient revenues to be had from eliminating those tax breaks to make up for the rate reductions, leaving an annual gap of some $86 billion. The Obama campaign picked up that $86 billion and simply pretended that the Romney tax plan would make up the difference with higher taxes on the middle class — a proposal Romney has specifically and repeatedly rejected.
Ending the aforementioned preferential treatment for life insurance and municipal bonds (an option that Romney’s chief economic adviser has said is “on the table”) would go a long way toward covering the gap that TPC projects, but the study’s authors did not include that in their estimates, because Romney has not specifically said that he intends to do it. TPC also assumes that by “high income” Romney means households earning more than $200,000 a year or more, but the top fifth of incomes begins at about $150,000 a year. Eliminating or reducing tax preferences for those households as well as the $200,000-and-up group would also enable Romney’s twin goals of lower rates and revenue neutrality, as analysts at the American Enterprise Institute have shown.
The president and his fellow Democrats of course are demanding a detailed proposal from Romney this instant; it is rich that a president who has not managed to pass a budget since his first year in office is in effect demanding one-half of one from Romney, who has not yet been elected. Romney is right to forgo making a specific legislative proposal at this point, because there are two important variables that will remain in play between now and January: the composition of the Congress and the state of the economy.
Romney’s emphasis is on economic growth, and he believes that his tax plan and other proposals, such as regulatory reform, will encourage it. The amount of tax revenue that a Romney tax program produces will of course be enormously dependent upon the rate of growth in the economy, and so it makes sense to keep many options open until Congress is ready to act. A stronger economy would require less in the way of offsets to maintain revenues in the face of rate cuts. And Romney would of course have many more policy options before him with a Republican Congress rather than being hamstrung by the fecklessness of Harry Reid and Nancy Pelosi.
Romney should continue to press his case for tax reform along the lines he has proposed, constantly reiterate that he will not raise taxes on the middle class, and point out that the Obama campaign is dishonestly attributing conclusions to the TPC study that its authors do not endorse. Obama can tell his own lies without dragooning others into them.