“In the long run, Mitt Romney will pursue a conservative overhaul of the tax system that includes lower and flatter rates on a broader tax base. The approach taken by the Bowles-Simpson Commission is a good starting point for the discussion.” That’s what the Romney campaign said in the “plan for jobs and economic growth” it released in September. One question his well-wishers have been pondering recently is whether the time has come for Romney to provide more details about this long-run plan.
Many conservatives, especially at the Wall Street Journal, have urged Romney to come out for a conventionally supply-side plan that brings the top tax rate down to the neighborhood of 25 percent. It is obvious why Romney has hesitated to take this step: He fears being labeled as pro-rich, especially since he is so rich himself, and being accused of widening the deficit.
But as is often the case with supply-side reforms, it’s the action on the margin that matters. Because he has already said he favors extending the Bush tax rates, cutting the corporate tax rate, and abolishing the estate tax, Romney is bound to be accused of succoring the rich and expanding the deficit regardless of what else he says. So announcing his support for additional tax cuts may not have large extra political costs. And there would be an upside. A tax-reform proposal could help Romney solidify conservative support in the primaries and the general election. It could also give him an economic-policy message more attractive than “Let’s keep George W. Bush’s policies.”
But though Romney should not let political concerns keep him from proposing a tax reform that benefits rich people, he should take care that his reform plan has more to it than that. Conservative tax policy, as the editors of National Review note today, has rarely been politically successful unless it had “some direct, tangible benefit to offer middle-class families.” The editorial points out that Rick Santorum, Newt Gingrich, and Rick Perry have all advocated measures that would lighten the tax burden especially for middle-class parents, and urges Romney to join the bandwagon by coming out for enlarging the child credit that the Contract with America introduced to American tax policy.
Cutting marginal tax rates for high earners, expanding the child credit, and adopting various other tax cuts would increase the deficit. But there are many ways to offset this effect. Capping the deductions for mortgage interest and state and local taxes would be one way, lowering the thresholds at which the top tax brackets begin another. While Romney may not wish to go into this level of detail even if he presents more information about his preferred tax reform, it may be wise to provide a few illustrative examples of how a reformed tax code could raise the desired level of revenue.
Romney will be speaking at the Economic Club of Detroit, a traditional venue for high-profile policy announcements, at the end of the week. It would be a fitting time for him to say some more about the tax reform he has been hinting at.