Romney on Taxes: Deny, Distract, Dissemble

by Jonathan Cohn | August 2, 2012

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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Source URL: http://www.newrepublic.com//article/105724/day-later-romney-and-allies-still-have-no-answers-devastating-analysis-his-tax-plan