Romney’s Tax Plan
The Claim: Romney’s tax plan can’t add up, Obama said. “It’s math,” he said. “It’s arithmetic.”
The Background: Romney has proposed reducing income tax rates by 20 percent and eliminating the estate tax and the alternative minimum tax. He says his plan would boost growth, while avoiding an expansion of the federal budget deficit because he also would curtail deductions, exemptions and credits. He says there are enough tax breaks for top earners that he would eliminate to avoid shifting the burden to the middle class.
The Facts: Romney’s tax plan can’t add up under congressional budget-scoring rules that don’t let him assume that economic growth will generate higher tax revenue.
Obama’s argument rests on an August analysis by the nonpartisan Tax Policy Center in Washington. That group sought to see if it was simultaneously possible to meet all of Romney’s principles: Cut tax rates, avoid shifting the tax burden to the middle class, don’t increase the budget deficit, and keep tax benefits for savings and investment.
The study found that, in 2015, $86 billion of the tax burden would be shifted to the middle class to keep the plan from increasing the deficit.
Romney’s advisers contested that analysis. They maintain they would consider some changes that the Tax Policy Center kept off the table, such as the tax exemption for municipal bonds. Those changes make the plan more arithmetically possible, though still politically difficult. Romney’s campaign hasn’t provided enough detail about what he’s proposing for deductions and exemptions to be able to analyze it completely.
Romney said in the debate that his plan wouldn’t cut enough tax breaks to offset all of his tax cuts. Economic growth, he said, would be generated by his tax plan and make up the difference. He hasn’t specified how much.
Congressional budget-scoring rules are conservative about anticipated growth from tax cuts because economists disagree over how much they spur the economy. If Romney’s plan goes to Congress, where those rules apply, it wouldn’t add up.