Commentary Magazine


Topic: Romney Tax plan

Continued Distortions of Romney’s Tax Plan

The Wall Street Journal  hones in on the big assumption in the Tax Policy Center study that’s driven much of the media coverage and Democratic attacks against Mitt Romney’s tax plan:

The study’s biggest distortion is its raw assertion that Mr. Romney would refuse to close certain loopholes. In the appendix, the Tax Policy Center lists, among others, two giant tax deductions that it says would go untouched: the exclusion of interest on tax-exempt municipal bonds, and the exclusion of interest on life insurance savings. The study claims that Mr. Romney won’t close these because they are incentives for saving and investment.

One problem: Nowhere do Mitt Romney or his advisers say that these deductions can’t be touched. Senior economic adviser Glenn Hubbard says these deductions are definitely “on the table.”

This is the assumption that TPC’s study was based on, despite prior comments from Romney that indicate these deductions and exclusions could still be on the table (and the latest clarification from the Romney campaign they actually are on the table).

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The Wall Street Journal  hones in on the big assumption in the Tax Policy Center study that’s driven much of the media coverage and Democratic attacks against Mitt Romney’s tax plan:

The study’s biggest distortion is its raw assertion that Mr. Romney would refuse to close certain loopholes. In the appendix, the Tax Policy Center lists, among others, two giant tax deductions that it says would go untouched: the exclusion of interest on tax-exempt municipal bonds, and the exclusion of interest on life insurance savings. The study claims that Mr. Romney won’t close these because they are incentives for saving and investment.

One problem: Nowhere do Mitt Romney or his advisers say that these deductions can’t be touched. Senior economic adviser Glenn Hubbard says these deductions are definitely “on the table.”

This is the assumption that TPC’s study was based on, despite prior comments from Romney that indicate these deductions and exclusions could still be on the table (and the latest clarification from the Romney campaign they actually are on the table).

At AEI, Matt Jensen offers a critique of the TPC study, and finds that this one tweak would demolish TPC’s conclusion that the plan would shift the tax burden to the middle class:

The first aspect that stands out is that Governor Romney has yet to detail what tax expenditures he’d repeal, but TPC assumes that many items are either “on the table” or “off the table.” While some of these assumptions make a lot of sense, others make less.

For example, a couple of items that TPC assumes are off the table are the exclusion of interest on tax exempt bonds and the exclusion of interest on life insurance savings. While Governor Romney has professed a desire to keep rates on savings and investment low, maintaining these exclusions is not necessarily what he meant. In fact, both of these exclusions largely benefit the wealthy, and, according to the Treasury Department, added together their repeal would net upwards of $90 billion that could be redistributed to lower-income individuals. That would go a long way towards balancing out the supposed $86 billion windfall for the rich and tax hike on the middle class and poor, and it could make the impossible suddenly possible.

TPC has acknowledged that there are alternative scenarios that aren’t covered in its initial study. Unfortunately, rather than serve as a theoretical exercise, the TPC study has been appropriated as a political attack by the Obama campaign. Romney is now being accused of supposedly proposing tax hikes on the middle class, when there are scenarios in which his tax plan could work without increasing the middle class tax burden. While the Romney campaign could help resolve this by actually releasing more details on his tax plan, TPC could also avoid being used as a partisan bludgeon by analyzing multiple possible scenarios.

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Obama Launches “Romneyhood” Attack

As John Steele Gordon noted during the weekend, Democrats have been pummeling Mitt Romney about his tax plan, after a new study by the Tax Policy Center claimed it would raise taxes on the middle class. The latest dig came from President Obama, who called the plan “Robin Hood in reverse”:

“The entire centerpiece” of Romney’s economic plan is a $5 trillion tax cut, he said.

The president spoke of the Tax Policy Center’s analysis of Romney’s plan again. “It’s like Robin Hood in reverse — it’s Romney-hood.”

The crowd laughed and roared and whistled its approval.

“That’s the choice in this election. That’s why I’m running for a second term as president.”

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As John Steele Gordon noted during the weekend, Democrats have been pummeling Mitt Romney about his tax plan, after a new study by the Tax Policy Center claimed it would raise taxes on the middle class. The latest dig came from President Obama, who called the plan “Robin Hood in reverse”:

“The entire centerpiece” of Romney’s economic plan is a $5 trillion tax cut, he said.

The president spoke of the Tax Policy Center’s analysis of Romney’s plan again. “It’s like Robin Hood in reverse — it’s Romney-hood.”

The crowd laughed and roared and whistled its approval.

“That’s the choice in this election. That’s why I’m running for a second term as president.”

Maggie Haberman notes some complaints about the study from the Romney campaign:

Romney’s campaign has argued the author of the report used to work in the Obama Treasury Department. Obama’s camp has noted it’s a nonpartisan think tank behind the study, and one Romney cited to discredit his primary rivals. Either way, ‘Romneyhood’ is going to be standard stump.

Obama needed to find a new class warfare attack on Romney after “you didn’t build that” flopped, and this Tax Policy Center study gives him the perfect prop for it. The Romneyhood message is simple and vivid: Obama wants to help the middle class, while Romney wants to raise taxes on the middle class to pay for tax cuts for the wealthy. Yes, this is a very premature and possibly inaccurate reading of Romney’s tax plan (the campaign still hasn’t released many of the details). But from a political perspective, Obama’s attack is pretty powerful.

The vast majority of Americans self-identify as middle class, even if their household income is substantially higher or lower than the median income. The vast majority of Americans also dislike when their own taxes increase, no matter what political party they belong to. Obama’s message doesn’t just speak to liberals or low-income voters; it speaks to the vast majority of voters.

The TPC may have a liberal bias, but that’s not a strong rebuttal from the Romney campaign (particularly as the director is a former member of Bush’s Economic Advisory Council). The best way to clear this up would be to see some more specifics on Romney’s tax plan.

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Democrats’ Tax Policy Kabuki

I was planning to write about the analysis of Romney’s tax plan by the Tax Policy Center that Democrats have been using to beat up on the Republican nominee this week. But now I don’t have to. Jennifer Rubin at the Washington Post has done it for me. And done it very well.

As Jen explains, the Romney plan was no more than an outline of how he would reform taxes to make them broader, with compensating lower rates. The left-of-center Tax Policy Center, with little specific to work with, then made some very convenient assumptions that allowed them—and delighted Democrats—to say that Romney’s plan would involve tax increases for the middle class while the rich would, as always in Republican tax proposals, get away with not paying their fair share.

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I was planning to write about the analysis of Romney’s tax plan by the Tax Policy Center that Democrats have been using to beat up on the Republican nominee this week. But now I don’t have to. Jennifer Rubin at the Washington Post has done it for me. And done it very well.

As Jen explains, the Romney plan was no more than an outline of how he would reform taxes to make them broader, with compensating lower rates. The left-of-center Tax Policy Center, with little specific to work with, then made some very convenient assumptions that allowed them—and delighted Democrats—to say that Romney’s plan would involve tax increases for the middle class while the rich would, as always in Republican tax proposals, get away with not paying their fair share.

It is part of the ritual of democratic politics that each side tries to offer only glittering generalities in putting forth the proposals they will try to implement if they win the election. The other side then immediately demands the specifics of the proposal in excruciating detail. There’s a reason for this, of course.  The proposing party wants to avoid alienating any important segment of the voters and so stays vague. The other party wants to know precisely whose oxen are going to be gored so that they can recruit them to their side. The mainstream media pretends to not understand this, at least with Republican proposals.

Stand by for a lot more of this sort of thing over the next three months. A lot more.

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