Romney’s impossible plans

Mathematically impossible” is a pretty strong statement. But it’s how the non-partisan Tax Policy Center described Romney’s tax plan. It’s not a close call: they aren’t complaining about margin of error or nitpicking. That would be impossible since Romney hasn’t provided any specific cuts to nitpick. What they did was take the concepts he has proposed and try to implement them in any way possible. They tried to design a plan, any plan, that fit his stated goals.

Let’s start by looking at his plan. Romney wants to significantly reduce marginal tax rates, the base percent people pay on each income bracket. And he wants to do it without increasing the deficit. To pay for it he plans to eliminate loopholes and deductions in the tax code. This is a fairly standard concept for tax reform referred to as broadening the base. He also doesn’t want to change the distribution, which means he doesn’t want any particular group to pay more or less than they are now. There are some Republicans who want to decrease taxes on the rich and increase taxes on everyone else, and Romney is specifically saying he doesn’t want to do that. Unfortunately, it turns out that isn’t possible.

While Romney hasn’t specified what he would cut, he has said how much he wants to reduce marginal rates. This tells us how much he needs to cut, and it’s too much. As many problems as there are in the tax code, you just can’t get enough money by eliminating deductions and loopholes to pay for that many cuts without a massive shift in the tax burden. Especially since his plan specifically says it will maintain current rates on interest, dividends and capital gains, which the rich use much more than anyone else. This means no matter which deductions you cut you end up with a lot less taxes on the wealthy and a lot more on everyone else.

Which isn’t to say taxes should remain as they are. The state of the tax code is a problem, and it does result in wildly unfair variations in how much people with similar income pay in taxes. But many people, particularly conservatives, have a flawed impression of how much money that actually accounts for and what reform would do. It is a myth that loopholes in the tax code are such a big problem that fixing them is an easy way to solve our Federal budget problems. Romney is intentionally exploiting that myth with his claim that he could pay for his wish list by closing loopholes and removing deductions.

Ezra Klein sums up Romney’s plan as:

“cut taxes by trillions of dollars, increase defense spending, keep entitlement spending on pretty much its current path for the next decade, and balance the budget.”

This should set off even the most idealistic optimist’s “too good to be true” alarm. If you bother to look at the numbers it’s not just unrealistic: it’s impossible.

So what is Romney actually going to do? Well, he could ignore the claim that he would keep the tax distribution as it is, and instead decrease taxes on the wealthy while increasing them on everyone else. He could also skip the hard work of eliminating deductions and pay for his tax breaks with deficit spending, the way George W. Bush paid for his tax breaks and Medicare part D. He could reduce marginal rates much less than he’s claiming he will. This is the problem with this plan. The numbers don’t add up, and there are enough competing claims that whatever you want him to do, you can make a case that it’s what he ‘really’ wants to. Voters are meant to see their preference in his plan and either not notice that he can’t do it all or assume that something else they care less about is the part that won’t happen.

What’s going to go? Cutting taxes, balancing the budget, or maintaining Medicare and Social Security and defense spending? The only thing he’s produced a real plan for is cutting taxes, and that’s the only one of those that isn’t hard. I think it’s fair to assume it’s the only one he’s really committed to.

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