Sure, Mitt Romney Will Lower Your Taxes—If You're Part of...

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AUGUST 1, 2012

Sure, Mitt Romney Will Lower Your Taxes—If You're Part of the Richest Five Percent

Attention middle-class Americans: One of the men running for president wants to raise your taxes. And it's not the guy who has the job already.

For some time, Mitt Romney has been promising to reduce income tax rates and then pay for these cuts by closing loopholes. But he's never specified which loopholes he'd close and now we know why. A new analysis from the Brookings Institution (and first reported by Lori Montgomery in the Washington Post) suggests that, in order to lower tax rates without increasing the deficit, Romney would have to close loopholes that benefit middle-class Americans as well as the wealthy. The end result, if I'm reading the report correctly, would be lower taxes for the wealthiest 5 percent of Americans but higher taxes on everybody else. (See the graph below, which Steve Benen of Maddowblog constructed based on the report's findings.)

I'm sure the Romney campaign will dispute the conclusion, but this isn't the work of political hacks. The analysis comes from William Gale, who is director of the Brookings-Urban Tax Policy Center, and Adam Looney, who is policy director of the Hamilton Project. Their conclusion is consistent with what other independent experts have speculated for some time and, strikingly, it holds true even when they make assumptions favorable to Romney:

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.

In addition, we also assess whether these results hold if we assume that revenue reductions are partially offset by higher economic growth. Although reasonable models would show that these tax changes would have little effect on growth, we show that even with implausibly large growth effects, revenue neutrality would still require large reductions in tax expenditures and would likely result in a net tax increase for lower- and middle-income households and tax cuts for high-income households.

For the record, reducing or eliminating tax breaks like the home interest mortgage deduction is a perfectly worthy idea, even if it means the middle class pay higher taxes. In the long run, most if not all of us need to pay more taxes. But Romney isn't proposing to raise taxes on everybody. He's proposing to raise them on the poor and middle class, while reducing them for the rich. 

Keep in mind that, even as Romney is proposing to taxes on most Americans, he is proposing to cut programs on which most Americans rely. His proposal to cap federal spending at 20 percent of gross domestic product, with a fifth of that set aside for defense spending, would inevitably require dramatic cuts to Medicare, Medicaid, and other vital public services

Figuring out the impact of campaign promises can be difficult. But if you're like 95 percent of Americans, understanding what Romney's plan means for you is simple: You'll pay higher taxes and get fewer public services, so that Romney and his friends can keep more of their money. 

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posted in: jonathan cohn, politics, the washington post, adam looney, lori montgomery, steve benen, william gale, the plank

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