It’s more than likely that Mitt Romney will be able to bob and weave and make it to the November finish line without ever being forced to seriously defend his oft-repeated claim that his package of tax proposals would not reduce the share of the federal tax burden on high-income people. But a new analysis from the Brookings/Urban Institute’s Tax Policy Center shows that it’s nonetheless an indefensible claim.
Matt Yglesias provides the big-picture gloss on the study and its implications:
“Revenue-neutral tax reform” is the holy grail of tax wonkery. The idea is to eliminate distorting tax deductions, and use the revenue raised to lower distorting headline rates. In the end the government has the same amount of money and the economy can grow faster. But there’s actually substantial ambiguity around what constitutes a distorting tax deduction.
The 1986 tax reform compromise worked out between Ronald Reagan and congressional Democrats, for example, equalized the tax treatment of investment income and labor income and considered that part of base-broadening. Since 1986, however, we’ve gone back to giving a strong tax preference to investment income and Mitt Romney’s version of tax reform involves keeping those preferences in place. As a new Tax Policy Center analysis shows, with that constraint in place the kind of revenue-neutral tax reform Romney is talking about becomes strongly regressive.
To put it simply, you can’t simultaneously reduce income tax rates across the board while further reducing taxation on investment income (not to mention abolishing taxation of inheritances) and then find anything like enough high-income “tax loopholes” to maintain the wealthiest Americans’ current share of the overall federal tax burden. And that is a problem separate from the virtual certainty that Romney’s tax proposals would enormously expand the federal budget deficit, and/or that the kind of effort (cf., the Ryan Budget) to reduce deficits he has shown he would support would have a devastating effect on the financial bottom line for low-to-moderate income Americans.
So in the unlikely event that Romney is pinned down on his conflicting claims about taxes, how will he react? He’d probably just brazen it out–i.e., he’d lie. Another favorite GOP option is to look at the tax code sideways, excluding inconvenient aspects of it (as Republicans so often do in railing about horrific income tax burden on the wealthy without considering other federal–not to mention state and local–taxes that are emphatically regressive). And then, of course, there are always magic asterisks–fantastic assumptions about economic growth–that can be used to place a big thumb on the scales.
But the reality is that Mitt and his party are committed to fiscal policies that would significantly skew the tax burden towards in the middle and bottom of the income scale, while concentrating “spending restraint” on the same people as well. And why wouldn’t they do so? If wealth is a measurement of “success,” and if success is a measurement of “virtue,” then regressive policies become a moral imperative, and that’s pretty much the unstated overriding goal of today’s conservative movement and GOP.