Unpacking 'Romneyomics': how Mitt would adjust dials on the US economy

The spending cuts have been felt on the street. On a recent June day, doctors outside the University of Puerto Rico’s medical center held a protest over cuts in their budget – for the third year in a row. “We are asking them [the government] to reevaluate the budget,” says Dr. Pedro Vargas, a spokesman. “Doctors are leaving Puerto Rico and going to the US.”

Doctors aren’t the only ones leaving. The 2010 Census showed that Puerto Rico lost 2.2 percent of its population – the highest rate in the nation – and the exodus continues. Two reasons for the outmigration: The unemployment rate is 14.8 percent – 1.5 percentage points higher than when Fortuño took office – and the murder rate is the highest in the US.

At a small sporting goods store in San Juan, tough times have become worse over the past six months, says Viana Bosque, whose parents own the shop. She works there with her husband, who lost his job in the government layoffs.

“Sales are down, suppliers are low in inventory, credit lines are difficult to get, and security has become an issue,” says her mother, Carmen Rodriguez. “The governor has given all the tax breaks to big business. The middle class is left subsidizing the poor.”

Tax reform is a hard nut to crack

If the US tax code were to get a make-over on Romney’s watch, the changes would have to conform to the Republican tenet of being “revenue neutral.” If perchance new revenues did flow into the Treasury, they would go toward paying down the national debt, says Hubbard.

It is perhaps the matter of tax policy on which Republicans and Democrats most differ, making it one of the thorniest to resolve.

Broadening the tax base is tough for any president because interest groups fight to prevent change. Take the largest federal tax exemption: employer-sponsored health-care insurance plans. In theory, subjecting the plans to some level of taxation would most affect the wealthiest Americans, because they have the most expensive health-care plans. But many union workers would be affected, as well, notes Mr. Naroff.

“What people forget is that a lot of unions traded off salary increases for benefit increases,” he says.

Other popular tax deductions are on mortgage interest, charitable donations, and payments of state and local taxes. How hard would it be to get Congress to change them?

“It would be really hard,” says Pete Davis, who worked on Capitol Hill when Congress approved the last major tax reform act in 1986.

Ronald Reagan was president then, and he supported tax reform. Now, Mr. Davis notes, Congress is much more divided. And the Romney plan for changing the tax code would probably result in 40 percent of taxpayers getting a tax hike and 60 percent getting a tax cut.

“It’s not that far from 50-50,” he says. “That’s why tax reform is so difficult.”

Alfredo Sosa contributed to this report.

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