The election cycle thus far has been one of very little substance – on both sides. It has been attack ads, mixed with vague claims about how to solve the country’s economic woes. This trend only continued when Governor Romney released his plan for tax reform. Like the Ryan budget, it consisted of large tax cuts supposedly paid for by closing deductions and loopholes, and broadening the base. It is also intended to be revenue neutral; however, Romney gave no specifics on how he plans to accomplish any of this. Since Romney is silent on the issue, the non-partisan Tax Policy Center filled in the details.
The findings of the study, generally speaking, are the tax cuts for the rich are so big that the only way to make the plan revenue neutral is to raise taxes on the middle and lower class. The graph below (from the Tax Policy Center report) shows the percent change in income after taxes for various income groups. Basically those making below $200,000 a year, the vast majority of Americans, will see an increase in taxes while those making above $200,000 will receive a tax break. Further, those making above $1,000,000 a year will see there after tax income rise by 4.1 percent. It is another reverse Robin Hood tax plan with which conservatives seem so enamored.
Team Romney has dismissed the report claiming liberal bias, even though every effort was made to be unbiased including a few generous assumptions. For example, the “Note” at the bottom of the graph explains that to be as progressive as possible all deductions and loopholes were closed entirely for the wealthiest first. However, in order for the plan to remain revenue neutral those deductions and loopholes had to be closed for lower-income people as well.
Although the study tried to make the plan as progressive as possible the result is still incredibly regressive. This is frightening because if Romney happens to win, and this plan goes into effect, there is no “as progressive as possible” guarantee. Meaning the cost of the massive tax cuts for the wealthy could be even more burdensome for the middle class than what is projected. This coupled with the right’s constant demand for spending cuts, which adversely hit low-income individuals, makes the Romney plan a serious threat to middle class growth while benefiting only people like Mitt Romney.
Hooray for fiscal responsibility.