Lies, Damn Lies, and Mitt Romney’s Tax Plan

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We all struggle trying to explain why Mitt Romney’s tax plan is….inconsistent with reality. Here’s another crack at unpacking the basics behind the famous TPC study that originally made this point. It’s actually pretty simple:

  • Romney has promised a 20% across-the-board rate cut. The part of this cut that affects people making over $200,000 per year would reduce tax revenues by about $251 billion per year. 
  • But wait! What about the economic growth this will unleash? That’s mostly mythical, but let’s bend over backwards here. If you incorporate the growth estimate of one of Romney’s advisors, Greg Mankiw, Romney’s rate cuts for the wealthy would only cost about $215 billion per year.
  • Next, try to pick out a set of deductions and loopholes that can be closed to make up for this revenue loss.
  • But wait! Romney hasn’t said exactly which deductions he would target. So it’s not fair to pick and choose specific deductions. Fine. Instead, let’s assume that Romney completely eliminates every single deduction for high earners. All of them. It turns out this would make up $165 billion per year.
  • So even under the best possible assumptions, Romney’s plan would cut taxes on the rich by $50 billion per year.
  • But Romney says he won’t cut taxes on the rich.

This is the point at which, on Star Trek, smoke starts coming out of the computer and it implodes because it was forced to consider a logical impossibility. Here in the real world, it’s the point at which conservatives desperately start trying to invent clever excuses. Martin Feldstein gave it a shot, but it turned out that he calculated wrong: Romney’s plan can’t work under Romney’s conditions. It can only work if you eliminate deductions all the way down to people earning $100,000. Harvey Rosen gave it a shot, but succeeded only by assuming wildly implausible growth estimates. Charles Dubay gave it a shot, but miscalculated a provision of the estate tax. Matt Jensen gave it a shot, but made things work only by assuming that Romney might eliminate the interest exclusion on life insurance savings and state bonds. This is pretty unlikely, though, since a centerpiece of Romney’s plan is to cut taxes on investment income, not raise them.

Needless to say, Romney knows all this. The guy ran Bain Capital for years. If there’s anything he knows his way around, it’s a spreadsheet. So is it fair to say flat-out that he’s lying about his tax plan? I guess reasonable people can disagree, but I’d say it is. There really aren’t any plausible assumptions under which his plan can work, and he obviously knows it. But he keeps saying it anyway. If that’s not a lie, what is?

UPDATE: More detail here from Josh Barro. He’s more generous than I am toward Jensen’s critique, but even at that Romney’s plan doesn’t come close to adding up.

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THE BIG PICTURE

You expect the big picture, and it's our job at Mother Jones to give it to you. And right now, so many of the troubles we face are the making not of a virus, but of the quest for profit, political or economic (and not just from the man in the White House who could have offered leadership and comfort but instead gave us bleach).

In "News Is Just Like Waste Management," we unpack what the coronavirus crisis has meant for journalism, including Mother Jones’, and how we can rise to the challenge. If you're able to, this is a critical moment to support our nonprofit journalism with a donation: We've scoured our budget and made the cuts we can without impairing our mission, and we hope to raise $400,000 from our community of online readers to help keep our big reporting projects going because this extraordinary pandemic-plus-election year is no time to pull back.

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