Romney’s tax-cut plan: Do the numbers add up?

Mitt Romney has a math problem, said The New York Times in an editorial. Every time he outlines his proposal to cut all federal income-tax rates by 20 percent, “some pest with a calculator will point out that it doesn’t add up.” Romney has said he’ll eliminate unspecified loopholes and deductions to make his tax cuts revenue neutral, even though a 20 percent tax cut for everyone—along with elimination of the Alternative Minimum Tax and the estate tax—would cost the government about $500 billion a year. But just last week, the nonpartisan Joint Committee on Taxation concluded that even if Romney eliminated almost every tax deduction on the books—including those for charitable contributions and mortgage interest—he could only cut tax rates by 4 percent without adding to the deficit. When asked about his plan’s numbers during this week’s presidential debate, Romney could only say, “Of course they add up.” Sorry, but every objective analysis of his numbers says they don’t add up, said Josh Barro in Bloomberg.com.So why propose a 20 percent tax cut in the first place? With his conservative credentials under fire in the Republican primaries, Romney obviously plucked that number “out of thin air for political reasons without regard to whether it was feasible.”

Actually, the plan is feasible, said John McCormack in WeeklyStandard.com. The left-leaning studies that challenge its numbers are “deeply flawed.” These studies fail to take into account the increased revenue that will come from repealing Obamacare, and they assume that “pro-growth tax policy can’t actually produce economic growth.” It can and does. Here’s how the math works, said The Wall Street Journal. By eliminating loopholes and capping an individual taxpayer’s deductions at 17 percent, Romney would cover about $3.8 trillion of the $5 trillion his tax cuts would cost over 10 years. The other $1 trillion or so would be provided by the increased tax revenues that would come from the economic growth stimulated by “a more efficient tax code and lower marginal tax rates.” What’s so mysterious about that?

The mystery is the continued faith that tax rates lead to a boom in economic growth, said former Reagan adviser Bruce Bartlett in NYTimes.com. An analysis of tax policy over the last half century, including the 1986 Reagan tax cuts that lowered top rates from 50 percent to 28 percent, shows that such cuts do slightly stimulate the economy—but only by “tenths of a percent.” And the impact doesn’t last. Romney’s contention that tax reform would “jump-start” our economy is “nonsense.”

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Even my fellow conservatives ought to admit the truth here, said Reihan Salam in NationalReview.com. It’s “highly unlikely that a Romney administration would cut the top marginal tax rate as deeply as it has proposed.” To keep his rate cut from expanding the deficit, every credible study shows, Romney would have to eliminate so many deductions that many middle-class taxpayers would have a net increase in taxes paid. That would be political suicide. But President Obama’s math is no less fuzzy. His proposed tax increase on the wealthy could not possibly pay for his immense spending commitments. What neither candidate is willing to admit is that something big has to give; we can’t keep cutting taxes, and protecting entitlements, benefits, and services from major spending cuts. Either voters accept a “transformative change” in Medicare, Social Security, and other benefits in coming years, or taxes will have to go up for nearly everyone.