Romney's Tax Plan

Mitt Romney has a tax plan that broadly promises to lower tax rates without increasing the deficit. The plan achieves these goal by broadening the tax base by eliminating unspecified deductions.

The Obama campaign has claimed that Romney's tax plan will raise taxes on the middle class, while Romney's campaign vigorously denies this.

The Obama campaign's claim is based on a study by the Tax Policy Center that concluded that Romney's plan could not achieve all of its stated goals. The conclusions of this study have not been contradicted. Those goals are:

• cut current marginal income tax rates by 20%
• preserve and enhance incentives for saving and investment
• eliminate the alternative minimum tax
• eliminate the estate tax
• maintain revenue neutrality

In fact, the unwillingness of the Romney campaign to specify which deductions it would eliminate to finance the planned tax cuts makes any detailed and definitive analysis of the plan impossible. All the Tax Policy Center could do was make some assumptions. Its assumptions were favorable to the Romney plan. However, the TPC also claimed that these assumptions were politically unrealistic, and that under any politically feasible set of assumptions, the Romney plan would be even less able to meet the five stated goals. Romney and his supporters have indicated that they would be willing to adjust the details of the plan to meet its stated goals (e.g., cutting rates by 18% instead of 20%), but it has not been specific about this.

The Obama campaign's assertion that Romney's plan will raise middle class taxes assumes that a President Romney would insist upon maintaining all five of the goals of his tax plan, and would thus need to seek additional revenue elsewhere--that is, raising taxes on the middle class. Although the GOP has put forward a consistent theme that too many people pay little or no income taxes--lending support to the view that the party is at least open to the idea of raising taxes on the middle class--there is nothing in the Romney plan that would require this.

In fact, taking history as a guide, the GOP has been reluctant to raise taxes on anyone, including those in low and middle income groups. Whether this is a matter of ideology or political expediency is not clear. What they have been shown repeatedly willing to do is to finance tax cuts for the affluent though deficit spending. That's what happened during both the Reagan and the G.W. Bush administrations. There is no reason to believe that a Romney administration would be any different.

Therefore, it seems most likely that a President Romney would not raise taxes on the middle class as the Obama campaign claims, but rather simply pay for his tax cuts by raising the deficit, and thereby abandon the his plan's final provision, which is to maintain revenue neutrality.