Mitt Tries Math, Fails
It’s a well known fact that Willard ‘Mitt’ Romney will say whatever he thinks he has to say to win election. While we can debate what his real positions will actually end up being, it’s basically all just guess work for now. Except when we do the numbers. Unfortunately for Mitt, some of us can do the math — and it’s not looking good for Romney.
Even on its face, Mitt’s campaign promise to remain revenue neutral and decrease tax rates by 20% for everyone – while protecting popular tax credits for the lower 80% – seems far-fetched. Start crunching the numbers, and it looks more like a bad joke.
Mitt is asking us to accept his claim that cutting tax rates 20% across-the-board is totally doable because he’s going to pay for it with $500 billion in spending cuts from:
- repealing the Affordable Care Act (only problem there – ACA actually decreases deficits – so repeal will cost money, not save it)
- converting Medicaid to a block grant (bzzt - sorry - no deficit impact there, either)
- increasing government efficiency (uh-huh)
- cutting Social Security and Medicare benefits for “younger generations” (first: you bastard! second: no immediate impact at all)
Hrmm… sounds like someone’s a tad delusional, no?
Remember, though: Romney is a Republican, and a very rich one, too. Interestingly, he has claimed that he’ll get tough with the 1%:
And in order to limit any impact on the deficit, because I do not want to add to the deficit, and also to make sure we continue to have progressivity in our code, I’m going to limit the deductions and exemptions particularly for high income folks. And by the way, I want to make sure that you understand, for middle income families, the deductibility of home mortgage interest and charitable contributions, those things will continue, but for high income folks, we are going to cut back on that so we make sure the top 1% keeps paying, paying the current share they’re paying or more. (Talking Points Memo - emphasis mine)
The problem for Mitt here is that in addition to the 20% cut for everyone, he has also promised to repeal the alternative minimum tax and the estate tax. James Kwak at The Atlantic does the math:
Under current law, which includes the Bush tax cuts, the top 1% in 2011 paid an effective income tax rate of 20.3 percent of their total cash income. Repealing the alternative minimum tax (a Romney proposal) would reduce their effective rate by at least 0.4 percentage points. A 20 percent cut in income tax rates would knock another 4 percentage points off their tax rate. Repealing the estate tax is worth another 0.3 percentage points of cash income, for a total tax cut of 4.7 percentage points. That works out to a 6.8 percent increase in after-tax income.
As for all those tax deductions Romney would end? Well, thing is, he’s not telling what those would be. He was overheard at a recent closed-door fundraiser telling wealthy donors:
“I’m going to probably eliminate for high income people the second home mortgage deduction,” Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.
“By virtue of doing that, we’ll get the same tax revenue, but we’ll have lower rates,” Romney explained. (NBC)
To date, Romney has named two (2) deductions he’s willing to ditch. He has also said he definitely wants to keep the break for investment income. (He would, wouldn’t he?) That’s just not going to do it. But let’s assume he’s open to more. The plain fact is that there are simply not enough deductions to ever balance out the tax cuts Mitt promises. Again, James Kwak:
According to Burman, Geissler, and Toder (2008), eliminating every tax expenditure other than the tax preferences for investment income (which Romney specifically wants to keep) would reduce after-tax income for the top 1% by 6.2 percent. Because Romney would lower tax rates by 20 percent, killing all those tax expenditures — state and local tax deduction, mortgage interest deduction, employer health plan exclusion, deduction for charitable contributions, everything — would only reduce after-tax income for the top 1% by 5 percent.
That’s a lot of numbers. The bottom line is that if, like Mitt Romney, you want to cut tax rates by 20 percent, eliminate the estate tax, and eliminate the AMT, it is arithmetically impossible for the top 1% to pay anything close to their current effective tax rate.
So if the wealthy aren’t paying more, and the rest of us get a big fat tax cut – how is that revenue neutral, exactly?