Mitt Romney tells voters: If I'm elected, don't expect huge tax cuts
Mitt Romney provided nuance to his proposed tax cuts, saying they must fit his goal of reducing federal deficits. But left unanswered is the question of how this will affect the middle class.
Mitt Romney says Americans shouldn't expect a big tax cut from him if he's elected president, because the nation also has to think about how to tame out-of-control federal deficits.
"Don't be expecting a huge cut in taxes, because I'm also going to be closing loopholes on deductions," Mr. Romney said Wednesday in Westerville, Ohio, flanked by a national debt clock, chronicling the nation's rising burden on future taxpayers.
The comments in some ways raise as many questions as they answer.
On one hand, they may be aimed in part at addressing skeptics who say Romney's tax plan is "mathematically impossible." He wants to lower the deficit by cutting spending while keeping tax revenues neutral. To do the latter, he would cut income tax rates across the board by 20 percent and make up the difference by eliminating some deductions and credits. Wednesday's comments could be a nod to the scope of those proposed deduction eliminations.
Yet, according to a recent independent analysis, such a plan could result in the unpopular prospect of a net tax decrease for the wealthy and a net tax increase for the middle class.
In general, many tax experts endorse the concept Romney is talking about: reducing tax rates while also reducing or eliminating many deductions or credits to "broaden the base" of income that is subject to taxation. The idea is that a simpler tax code will be more efficient at both gathering federal revenue and stimulating strong economic growth – even if the reform makes no change in total federal revenue.
The independent review of Romney's proposals, released in August by the Tax Policy Center in Washington, did not claim to be an official "scoring" of the plan, because "certain components of his plan are not specified in sufficient detail." But the analysis did examine the implications of key Romney ideas. Those include the 20 percent cut, being revenue neutral, eliminating the Alternative Minimum Tax, and maintaining current tax breaks for savings and investment.
Even if Romney completely eliminates remaining tax breaks for high-income households, the net effect effect would be a tax decrease for them, the study concluded. Meanwhile, the reductions in tax breaks on other households would be large enough to result in a "net tax increase" for them, it added. Otherwise, it concluded, Romney's goal of revenue neutrality wouldn't be met.
The candidate's comments Wedensday, which offered no new details about his tax plan, leave this math question about deductions unanswered.
"I don’t interpret this as evidence that Governor Romney wants to increase taxes on the middle class in order to cut taxes for the rich, as an Obama campaign ad claimed," Tax Policy Center director Donald Marron wrote in a blog shortly after the controversial study was released. "Instead, I view it as showing that his plan can’t accomplish all his stated objectives."
But a Romney adviser this week suggested that there could be another solution. In a debate between economic advisers affiliated with the two presidential campaigns, pro-Romney economist Kevin Hassett echoed the thought that Romney would put a priority on not raising taxes for the middle class.
Mr. Hassett, an American Enterprise Institute economist and an informal adviser to Romney, predicted that if the Romney math doesn't add up, Romney's response would be to scale back the cut in tax rates in order to avoid asking middle-class families to provide more tax revenue.