PLANK AUGUST 2, 2012
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Twenty-four hours later, the conservative reaction to a devastating report about Mitt Romney’s tax plan is proving almost as interesting as the report itself.
The report, published by the Brookings-Urban Tax Policy Center, demonstrated that Romney’s plan, if implemented, would reduce taxes for the wealthiest 5 percent of Americans but increase taxes for everybody else. It's one part of a larger agenda that would likely require, thanks to a proposed cap on federal spending, deep cuts to key government programs touching everything from health care to education to law enforcement.
As I said yesterday, if you’re like most Americans, this is a plan to undermine your government services and stick you with a higher tax bill, all so Romney and his pals in the penthouse suite can keep more of their money.
So how did Romney and his allies respond to this report? The initial reaction, delivered via Romney policy director Lanhee Chen and several conservative commentators, was to impugn the source. It turns out that one of the report's three co-authors, Adam Looney, was a staff economist in the Obama Administration. But one of the other co-authors, William Gale, was a staff economist in the (George H.W.) Bush administration. And the Brookings-Urban Joint Tax Center has an impeccable reputation for reliability. As TPM's Benjy Sarlin has noted, the Romney campaign itself has cited the Center as a source of “objective, third-party analysis.”
A more creative, and interesting, response to the report came from Daniel Halper, online editor for the Weekly Standard, who pointed out that Obama’s own budget would raise taxes on 27 percent of taxpayers—or, as the Standard's blog headline put it, “one in four taxpayers.” That’s true, according to some estimates, including one from the very same Tax Policy Center. But it’s not the shocker that Harper makes it out to be.
As the Tax Policy Center's Howard Gleckman confirmed to me via email, the lower income people paying higher taxes in these estimates wouldn’t actually write larger checks to the IRS. Rather, they would see lower pension or investment income, because proposed changes to corporate income taxes would, in theory, mean lower share prices or dividends. Only a minority of taxpayers at the lower brackets would lose income in this way and, even then, they wouldn't lose much: The change in after-tax income would be just zero-point-one percent, on average, or about $50 for a family making between $30,000 and $40,000. (All of this is assuming the model accurately captures the murky relationship between corporate taxes and shareholder income. This is the subject of an ongoing debate among economists.)
Reasonable people can disagree about whether that really counts as a tax hike, at least in the traditional sense, and whether the amounts involved even matter. What's beyond dispute is that, like the allegation of author bias, this argument doesn't even grapple with the main substantive claim at the heart of this debate—that Romney’s tax plan, while reducing taxes for the rich, would raise taxes for everybody else by a significant amount of money.
No, the only substantive response so far has been to claim that the Tax Policy Center’s analysis didn’t fully account for the magically high economic growth Romney’s economic plan would supposedly generate. Of course, this argument is just as flimsy as the rest. Remember, the Tax Policy Center researchers tried the calculation with economic assumptions favorable to Romney. The result was the same: The middle class ended up paying more in taxes. Supply-siders like the American Enterprise Institute's James Pethokoukis say the assumptions should have been even more favorable, but this is simply not a conclusion that most mainstream economists would support.
To reiterate something I've said before, I happen to support higher taxes for the middle class, at least over the long term, assuming they are part of a balanced deficit reduction approach that preserves Medicare, Social Security, and other critical programs. In an ideal world, Obama would make a case for precisely that sort of agenda, because without those higher taxes (above and beyond taxing the rich, as Obama has proposed) government won't have enough money to fund future spending obligations. But it's hard to fault Obama for not presenting the full facts about fiscal tradeoffs when the other side has shown repeatedly that it doesn't care about facts at all.
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9 comments
I agree that the middle-class tax cuts should expire, along with those on the rich, but the Dems won't push it till the economy recovers, if it ever does. Most taxpayers agree with the rich--that taxes are evil. However, they're a necessary evil. Even the the rich know this. Without the government that taxes support, most people would be cooked on up and eaten on down by predators. Many rich people used to be happy to pay taxes, just to stay alive and thrive. Some still are. I wish more of them would speak up.
- magboy47.
August 3, 2012 at 1:02am
Mitt Romney is no Ronald Reagan. Recall when Reagan proposed his version of tax reform, he promised that nobody's taxes would go up as a result. And recall Reagan's bewildered look when his own advisers acknowledged that some people's taxes would go up, some would go down. What confounded Reagan's critics was that his bewildered look was reassuring to many Americans. Romney doesn't enjoy the same confidence as Reagan, the confidence that, while Reagan may not know the details, he would not lie about them either. No, a bewildered look from Romney would not elicit reassurance. Hence, he and his advisers must deny, distract, and dissemble. Because Mitt Romney is no Ronald Reagan.
- rayward
August 3, 2012 at 7:18am
I make no effort to avoid taxes on my income, and while I"m not a 1 percenter, I'm solidly in the top 5%. I wouldn't say I'm exactly happy to pay taxes, but I don't mind paying them right now - as I say, I make no effort to find loopholes to avoid paying taxes, and my angst over the checks I write lasts about ten minutes once a year. I would frankly be happy to pay them if they were being spent responsibly by a government looking out for the welfare of its citizens and most importantly, one investing in the future success of the nation. Now, I know my "responsibly" and "investing" may be another person's flagrant waste and abuse, so we can't all possibly be happy. but there are legions of ways we spend money that almost all responsible analysts conclude are counterproductive or unnecessary. We could eliminate these if we had a responsible Congress. So we should all be able to be at least "not unhappy" about paying our taxes, were we but to actually and honestly engage in our civic responsibility.
- IowaBeauty
August 3, 2012 at 8:32am
Here's my best stab at a substantive response, putting myself in the Romney campaign's shoes: 1. The "current policy" baseline level of revenues used by TPC assumes revenues from the various ACA taxes. We consider these taxes fundamentally illegitimate and don't assume them in our baseline. 2. TPC's attempt to include dynamic revenue effects was just an aggregate back-of-the-envelope exercise, and didn't indicate the distribution of these benefits. Such an analysis would show: a. As the marginal tax rate on labor falls, lower-income families will have more incentives to work, raising their after-tax income. b. Reported income for higher-income filers would also rise due to lower rates, but much of this would be due to lower disincentives to shield taxable income. So the real benefits of lower rates accrue more to lower-income households. 3. TPC by its own admission didn't analyze our proposal to lower the corporate income tax rate to 25%. Beyond the substantial dynamic benefits of this policy, since studies show labor bears the bulk of the burden of the corporate income tax [Note: I'm role-playing a cherry-picking conservative flack here], there are benefits to lower- and middle-class families that are being omitted.
- primwallflow
August 3, 2012 at 1:11pm
Well said top-to-bottom Jonathan. Count me among those in the middle class who believes that the middle class tax cuts should (at least partially) expire, hopefully in tandem with needed income tax reform that would broaden the tax base and then adjust marginal rates to where they would raise the level of revenue necessary to fund what the federal government decides should be in the "basket of goods" delivered to Americans of all income stripes. primwallflow, Romney can probably play around with the "lower marginal rate" argument, but I don't think lower marginal rates have ever really had a lasting effect on taxpayer behavior. Of course, I haven't read a study on that in the past decade, so I don't really know.
- Lundell
August 3, 2012 at 2:02pm
Iowa's comment about a "responsible Congress" is right on; we need one. It seems we're getting the opposite, it's become a circus. The logjam was bad enough but the Tea Party has been a catastrophe. Anyway, thanks to Mr. Cohn for the incisive reports. Republican wriggling on this issue is both funny and infuriating. The Gini curve - the distribution of wealth (or non-distribution) in the US is even worse than most of us had supposed and along with that goes a lack of power. Yet if Obama even mentions the term "middle class" he's accused of "class warfare" so we can't even have a national discussion about these very important issues let alone get a chance to vote on them.
- Sophia
August 3, 2012 at 2:40pm
One of my aunts once asked me "Why are you a liberal?" My response was "I'm not so much a liberal so much as I am a lover of facts." Until the right wing can present a reasonable, fact based plan they've lost my vote
- ARealHero
August 3, 2012 at 4:34pm
Good Reporting. Deficits should only be sparingly justified by recessions and, when applied, should not be through trickle down economics. We must pay for spending with taxes. When Reagan decoupled taxes from spending, the likely result was unpaid for spending. Reagan almost tripled the national debt. Bush, applying the same principles, doubled the national debt. When taxes and spending were recoupled under Clinton, surpluses resulted. Imagine the result if we had had to pay for Bush's war in Iraq.
- Nusholtz
August 3, 2012 at 6:38pm
magboy47: "Many rich people used to be happy to pay taxes, just to stay alive and thrive. Some still are. I wish more of them would speak up." Some of them have, and do. http://patrioticmillionaires.org/ "I agree that the middle-class tax cuts should expire, along with those on the rich, but the Dems won't push it till the economy recovers, if it ever does. Most taxpayers agree with the rich--that taxes are evil." There may be more understanding than we thought among the public that middle class tax rates will have to go up. I was surprised by a February survey that said 70% think that everyone's taxes should go up to solve our fiscal problems--not just on the wealthy (supported by 85%). http://www.nytimes.com/interactive/2012/02/12/us/relying-on-government-benefits.html While that 70% was split as to whether higher taxes should play a major or minor role, that number was far higher than I expected. But it may be politically impossible to talk honestly about this prior to the election. Everyone can see the attack ads, right?
- dsimon
August 5, 2012 at 2:45pm