For several weeks, weve been asking Republican presidential nominee Mitt Romney to explain how he can cut taxes, as promised, without adding to the nations debt, as also promised. Now hes effectively let the cat out of the bag: He cant.
Romneys tax plan calls for reducing income tax rates by 20 percent. The top bracket would go from 35 percent to 28 percent. He has said that he can do this in a revenue-neutral way by eliminating loopholes.
There are a couple of pitfalls here. The first is that while closing loopholes sounds good, the costliest ones are cherished by most Americans. These are tax provisions that promote home ownership, charitable giving, and employer-provided health care and that allow taxpayers to deduct their state and local income taxes. Limiting or eliminating these would be extremely difficult.
The second obstacle, as shown by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, is that Romneys plan is mathematically impossible. Take away every deduction from every wealthy household, and you still couldnt make up the revenue the government would lose by reducing rates without raising taxes on middle-class households.
Not so, Romney protested recently, and cited an analysis by Harvard economist Martin Feldstein. Feldstein said the math could work – if you took away every deduction from every household earning $100,000 or more. (Even then, he couldnt pay for the estate tax abolition Romney also favors, but never mind.) Is that what Romney has in mind? If not, what is his plan?
On Friday, ABCs George Stephanopoulos put the question to the candidate. No, middle income is $200,000 to $250,000 and less, Romney replied.
But then, the Harvard study shows, the math cant work. His answer? The biggest source of getting the country to a balanced budget is not by raising taxes or by cutting spending, he said. Its by encouraging the growth of the economy.
In other words, we are back to counting on magic – the voodoo economics of the Reagan era, the wishful thinking of George W. Bushs tax cuts that helped turn a surplus into the deficit now weighing the nations economy. Cut taxes and hope the economy grows faster than predicted.
When the nation is already on course to build up a debt so large that interest payments alone will begin to drown us, Romney wants to reduce taxes further, with – it now appears – no plan to make up the difference. It almost takes your breath away.