“There really is no serious dispute that the parameters of their plan can’t be met. It’s like saying you’re going to drive from Boston to Los Angeles in 10 hours without speeding. There’s just no way to make the numbers add up.”
~Daniel Shaviro, a tax law professor at New York University.
Dylan Matthews points out a letter written by the Joint Committee on Taxation to the Senate Finance Committee; it is no ordinary or inconsequential letter. The Joint Committee on Taxation is a non-partisan scorekeeper in Congress; whatever they write is to be taken as completely non-political and focused on facts and facts and facts. They conducted an experiment wherein they tried to determine if nearly every tax deduction were eliminated … how much could taxes be reduced without increasing the deficit; their finding: 4%.
Now – this is significant because Romney has already said he wants to move rates from 35% to 28% and that he will pay for it by eliminating deductions. When he is asked which deductions specifically; he says – we’ll work it out with Congress. But his math is IMPOSSIBLE; it’s like living in a fantasy land and some voters simply aren’t willing to accept that they’re being sold a bill of goods on this deal. If you want fantasy; go read something from J.K. Rowling … if you’re looking for a serious tax proposal for America … Romney’s not your guy. And this is why Romney will not explain how his tax plan works; he will not share the math because then he will himself have shown “the man behind the curtain” … and it ain’t the grand Wizard of Oz.
That’s why the chief economist at Moody’s and former McCain adviser – Mark Zandi – has said that “the arithmetic doesn’t work” HERE. That’s why the non-partisan study by the Brookings Institute co-written by a former Bush administration official said the only possible result of reducing taxes from 35% to 28% for the wealthy and not adding to the deficit is a huge tax increase on the middle class; you can read that study HERE.
You can read the letter yourself HERE; an excerpt:
The Joint Committee staff estimated these changes relative to the present-law baseline. That is, the tax rates for the individual income tax in 2013 and beyond are: 15 percent, 28 percent, 31 percent, 36 percent, and 39.6 percent. There is no “AMT patch” under the present-law baseline and the PEP and Pease provisions are part ofthe present law baseline. The Joint Committee staff used its conventional modeling to estimate the provisions described above and used the resulting net revenues gained over the budget period to estimate an equal percentage decrease for all tax rates on ordinary income that would make the package roughly revenue neutral for the year 2013-2022 period. The revenue neutral tax reform package outlined above would permit a four-percent decrease in all ordinary income tax rates. Under the proposal, the individual income tax rates would be: 14.4 percent, 26.88 percent, 29.76 percent, 34.56 percent, and 38.02 percent.
This is the Romney campaign’s response to this study:
“This self-described ‘experiment’ says nothing about the pro-growth tax reform proposed by Mitt Romney. It has different assumptions and different revenue goals. It’s simply irrelevant to any analysis of his plan.”
And there is a name for the explanation the Romney campaign gives us; it’s called “dynamic scoring”. ”Dynamic scoring” essentially means these non-tax cuts (remember – they’re supposed to be revenue neutral) will increase taxes to the treasury because of all the growth it will create. This “dynamic scoring” model is exactly what was told to the American people when George W. Bush tried to sell his tax cut plan which is the #1 driver of our current deficits (source). When you pull the curtain back – you see that the ideology and economic argument behind Mitt Romney’s tax plan is the exact same argument behind George W. Bush’s tax plan. All that did was make the rich richer and the deficit bigger putting more economic burdens on the middle class; dynamic scoring is a fantasy.
“This confirms that the math behind Reagan-style tax reform doesn’t work even if you completely eliminate the most popular of deductions. Broadening the base as Republicans propose would not only fail to cut the deficit, it also fails to reduce rates much. What it does do is sock middle class families with an immediate tax hike.”
~Senator Chuck Schumer (D-NY)
So – the Romney’s response is simple … the reason the study found what it did is that it doesn’t factor in the Romney economic BOOM that America is going to experience just from his having existed. Tax cuts only work as a benefit to the economy when people are actually paying less in taxes than they otherwise would before. If your tax plan is revenue neutral … then there isn’t even $1 of stimulus (which is really what this is about) to the economy. So – there would be very little gains associated from any net-reduction of taxes that are paid for by deductions thus leaving taxpayers with the same exact tax bill they had before. No benefit to the economy almost whatsoever.
The American Physical Society explains how Bush tried to use dynamic scoring in his proposals for tax cuts HERE; short answer – it failed:
The recent report from the Congressional Budget Office, now in the hands of dynamic scorers, offered little comfort. They are the folks who argue that forecasts of federal revenues must take into account the impact of tax cuts on the economy. They believe that conventional CBO projections based on static scoring have consistently underestimated the flow of money into the federal coffers.
They got a chance to prove their mettle this year, when Congress chose Douglas Holtz-Eakin to head the CBO. The Princeton-trained former chief economist for the White House Council of Economic Advisors is a staunch advocate of dynamic scoring and one of the architects of the Bush tax cut plan.
But tax cutters and dynamic scorers got a shock. Of the seven scenarios Holtz-Eakins’ CBO used to project federal revenues, none produced a rosy picture. In fact, two gave a more pessimistic result than the statically scored baseline.
The Washington Post explains how Republicans tried to use dynamic scoring to show tax cuts would increase tax revenues HERE; it failed:
But when outside budget analysts actually run the numbers, they don’t always look great: a “dynamic” analysis of the Bush tax cuts by the Treasury Department in 2006 refuted the exaggerated claims that Republicans had made about them. That’s partly why even Republican-appointed directors of the Congressional Budget Office haven’t embraced dynamic scoring as the office’s primary approach to estimate the cost of legislation. And Bush’s embrace of the method is partly why “ ‘dynamic scoring’ is a pair of dirty words among many Democrats,” as my colleague Lori Montgomery explained back in September, examining why supercommittee Dems might dismiss this kind of revenue as “voodoo economics.”
To be sure, it’s not clear exactly what kind of “future tax reform” the Republicans on the supercommittee are considering—whether they’d be tax cuts, closed loopholes, or other changes. So far, the lawmakers are staying mum about the details—and the conditions under which such tax reforms would generate that big chunk of revenue. (Queries to supercommittee member Jon Kyl and Jeb Hensarling’s press offices went unanswered.)
The Center for American Progress says dynamic scoring doesn’t work HERE.
Simon Johnson – the former chief economist at the IMF says they don’t work HERE.
This is what happened to government revenues after the Bush tax cuts with “dynamic scoring”:
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