Governor Romney has proposed a 20-percent cut in federal incone tax rates, and that the numbers don’t add up. Josh Barro*–not exactly a left-winger–posted a withering analysis here. The Romney campaign responded as follows:
There’s just one problem; Barro isn’t the first person to analyze Governor Romney’s tax plan using IRS data from 2009. In fact, Harvey Rosen, the John L. Weinberg Professor of economics and business policy at Princeton University and a public finance expert, also based his analysis on the same data but came to the opposite conclusion. Governor Romney’s tax plan works and the math adds up.
In fact, no fewer than six independent studies have confirmed the soundness of the Governor’s tax plan. Rather than wasting time trying to discredit the proposals of the Republican nominee, perhaps Mr. Barro and other journalists should investigate President Obama’s tax reform package. Or, more accurately, his lack of one.
I’ll let you read Barro’s even more devastating response to the “six independent studies” remark. For starters, four of the six “studies” are blog posts or op-eds.
I have read Harvey Rosen’s short paper. It’s worthwhile reading, despite some problems that Barro notes. It’s produced with nowhere near the technical sophistication or detail of the Tax Policy Center’s original microsimulation-based critique. Despite Rosen’s breezy tone, I read his numbers to say the numbers don’t really work. Or rather the numbers might possibly work if one is willing to (a) reduce the tax ceiling to $100,000, and/or (b) assume supply-side growth effects regarding lowered marginal tax rates, and definitely (c) whack fundamental structures of the tax code which are so politically entrenched that Romney and Ryan are afraid to go near them right now. Here’s my favorite quote from Rosen’s paper:
In case you have trouble reading this, it says: “I imagine that doing so [making Romney’s numbers work based on current 2013 tax law and protecting people with incomes below $200,000] would not be mathematically impossible.” This not-so-ringing endorsement is from perhaps the most credible economic study cited by the Romney campaign itself to show the validity of its plan.
Several readers suggest that the 2012 tax law baseline provides a fairer baseline than the 2013 tax law does. That’s a fair point. Below is Rosen’s results table with both baselines listed. The numbers look a bit better with the 2012 baseline. But my point stands. Under any scenario, one would neeed to fundamentally wack the tax code and hope for aggressive growth effects for the numbers to work. The first is just not going to happen. I doubt the second one would happen, either. This is not a credible plan, even if one has a relatively sympathetic analyst explore what it takes to make the numbers work.
The one substantive contribution Romney has made is the suggestion to cap deductions (and perhaps exemptions). I think this is an excellent idea.
For a clear version of the chart go here.
[Cross-posted at The Reality-based Community]