Just because Bill Clinton says something, doesn't make it true. In fact, if Bill Clinton says something and its part of a political campaign I would be very skeptical of taking it as true. Thus taking Bill Clinton's assertion that Romney's tax plan is not mathematically feasible at face value is a dangerous path to take.
It's just math. If the reduction in personal tax rates, all else equal, results in reduced taxes of $3.6 to $3.8 trillion over ten years (this is from The Tax Policy Center study the centerpiece of the denialist literature), then the question is are there about $360 billion in annual tax expenditures that can be targeted. And the answer to that is of course there are.
"The Challenge of Individual Income Tax Reform: An Economic Analysis of Tax Base Broadening," is a Congressional Research Service study on a legislative proposal by Senators Wyden, Begich and Coates, (Wyden and Begich are Democrats, Coats a Republican) to "broaden the tax base by eliminating many tax expenditures and reduce tax rates."
The CRS finds
"There are over 200 separate tax expenditures, which are projected to total over $1.1 trillion in FY2014. The revenue loss of all tax expenditures, however, is highly concentrated in a relatively small number—the largest 20 tax expenditures account for 90% of the total revenue loss of all tax expenditures. This amount is equivalent to 74% of the total FY2014 revenue from individual income taxes. If used for rate reduction alone, eliminating these tax expenditures could allow tax rates to be reduced by around 43%: for example, the top 39.6% tax rate could be reduced to approximately 23%."
At least when I went to school $1.1 trillion in annual tax expenditures is greater than the $360 billion needed to make the proposal tax neutral. CRS thinks the cut can be twice as large as what Romney has proposed.
The math works. You may argue it's not politically feasible to eliminate the tax expenditures. You may argue its not a desirable policy to eliminate the tax expenditures. But the math certainly works.
Bill
You're ignoring the fact that he also plans to increase government spending on the military and in other areas. It's a classic corporate shell game of "adding up the pieces seaparately and showing the client the final bill after the work is complete". It's not Just his tax plan. It's his tax plan AND the rest of his budget that's the problem.
ReplyDeleteCutting $1.1 trillion dollars of military spending would have exactly the same effect as the Romney tax plan. Given that military expenditures make up over 50% of the Federal budget also makes it the practical place to cut federal spending.
Oops. He's a Republican. The Governor plans to spend $2 trillion dollars MORE on the military. Now where does THAT money come from?
You are right, I am ignoring other parts of the plan. I was only responding to the claim you can't lower rates and keep revenues flat by eliminating deductions.
ReplyDeleteYou are incorrect on military spending. "National Defense" is $700 billion of the $3.8 trillion Federal budget. (http://www.whitehouse.gov/omb/budget/Historicals table 6.1). Iraq and Afghanistan is over $100 billion of that. Even with those wars National Defense is 20%, not 50% of total spending. Still a place to cut.
I'm not going to try to defend Romney's defense spending target of 4% of GDP. I disagree with him.
Thank you for the prompt reply. I think I've just been taught something in a reasonable and even-handed fashion. Normally this turns into a flame war. I'm thankful that it didn't this time.
DeletePerhaps you can answer me another,
Who gets the shorter end of the stick by reducing deductions? The entire purpose of a graduated tax system and tax credits is to reduce the tax burden on thoe with the least ability to pay and (originally) to incentivise actions that benefitted the economy and encouraged planning for the long-term. I agree the system of credits and deductions has made filling out tax forms increasingly arcane and onerous but don't a lot of middle and low-income Americans (to say nothing of small businesses) flat-out DEPEND on those tax credits/refunds every year?
I suppose I could get behind Bill O'Reilley's suggestion of symbolic fee of at least a dollar or some other reasonable amount to shut up those people who go on about having "skin in the game", but in a game of trillions, an additional ~$330 million dollars doesn't mean much (unless its spent entirely on education or something else that's essential and criminally underfunded).
Without specifics as to which credits he would remove, isn't the fear that by cherry-picking which deductions get cut a Romney Administration could easily increase the effective tax burden paid by most Americans and still provide a real tax cut for the rich at least partially justified? Especially considering the stated goal is to get more people to pay federal income tax while also promising to reduce the tax burden on the wealthiest portion of society?
I can't argue with anything you've said. I agree, the risk of not specifying which deductions will be cut increases the risk of one group bearing the burden of the cuts. The only thing you can fall back on is Romney's promise not to raise taxes on the middle class. Should you believe it? I don't know.
DeleteI think Romney mis-sold his tax plan. When I first heard, "revenue neutral tax cut" I thought what is the point of a tax cut that doesn't cut taxes? What he really wants to do is simplify the tax code to stimulate growth. I don't know about most, but there are many economists who believe it would spur growth. But again, you are right, without the details, who knows if it would achieve that goal and keep his promise on not increasing the tax burden on the middle class.
This point about "skin in the game" is a bit deceiving, at least to me. My daughter, a college student, does not pay income taxes. But she sure does pay taxes. She pays social security and medicare taxes. Does she have skin in the game? You bet she does. She's already complaining about it. That's skin in the game.
The US Treasury recently released the September issue of its Monthly Treasury statement (http://www.fms.treas.gov/mts/mts0912.pdf), an exciting day in our house. Total receipts by the US government for the 2012 fiscal year, ending September, was $2.4 trillion. $775 billion from social security and medicare taxes. The employer pays half and the employee pays the other half. That's skin in the game.