Backtracking on Taxes

September 24th, 2012

Inspired by Romney adviser: If Romney can’t broaden the base enough, he’ll give on his tax cuts (Suzy Khimm, WashingtonPost.com9/24/1217:37).

 

“If you think the base-broadeners don’t add up, if you think he can’t get to 28 percent, then the right thing that would happen, as you know, if you’re going to have a revenue-neutral reform, is that they would have a different change in rates. “ – Romney economic advisor Kevin Hassett today

 

Mitt Romney has been (correctly) criticized

That his tax cut is budgetarily outsized.

 

He’ll keep it revenue-neutral, he keeps claiming,

Without a single cancelled loophole naming.

 

Now Mitt’s come up with a new reply

Which in this case isn’t technically a lie.

 

He’ll just cut tax rates a little less,

Though how much is anyone’s guess.

 

From a tax policy perspective, Mitt is correct.

Too bad there now won’t be any job creation effect.

***

Hassett’s statement amounts to a complete flip-flop on Mitt’s oft-repeated promise to cut tax rates by 20%. More and more economists have questioned his assertion that he could do that in a revenue-neutral way by cutting loopholes, and even his own “studies” basically admit it can’t be done. So, the Romney campaign is now saying that if President Romney can’t eliminate enough deductions to make the rate cut revenue-neutral, then he’ll just make it smaller.

From a tax policy perspective, I applaud that statement. Would that Republicans had followed that rule in 2001 and 2003, rather than rashly and massively cutting tax rates (while simultaneously increasing spending), based on the supply-side mantra that those cuts would magically spur more than enough economic growth to make up the lost revenue. So kudos, Mr. Romney, for finally saying something relatively fiscally responsible (though any truly fiscally responsible tax reform plan really needs to be revenue positive).

But (and there is of course a but), this shift does not bode well for Romney’s economic policy. Mitt says his tax policy will create 7 of the 12 million jobs he promises (which, BTW, economists predict we’ll get anyway under current policies). So what happens to those jobs if Mitt now says: Sorry, no tax cut after all.

That a revenue-neutral tax rate cut will spur massive economic growth by increasing economic efficiency is questionable enough an assertion. But as that rate cut gets smaller and smaller, the assertion becomes even less tenable.

So Mitt’s tax cut flip-flop means his economic plan…

will flop.

***

Update 10/01/12: In a Fox News interview, Chris Wallace asked Paul Ryan seemed to contradict the campaign’s flexibility on rates by stating that “keeping tax rates down” was the highest priority. So the campaign (as usual) appears to be playing both sides of the fence.

 

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Comments

3 Responses to “Backtracking on Taxes”

  1. Newsericks » Blog Archive » Have You No Shame? Says:

    […] eliminate enough loopholes” fantasy, having instead resorted to the more defensible position that if he can’t eliminate enough loopholes, he’ll just reduce the size of his rate cut. That at least is fiscally prudent and mathematically possible, so if the Examiner wants to come to […]

  2. Newsericks » Blog Archive » Lie-namic Scoring Says:

    […] follow-up to Backtracking on Taxes and The Bucket/List, inspired by the campaign’s increasing resort to dynamic scoring to shore […]

  3. Newsericks » Blog Archive » Employ Story (or: To Infinity, and Beyond!) Says:

    […] follow-up to Read My Lips: No New Jobs and Backtracking on Taxes, inspired by the Romney campaign’s backtracking on Mitt’s plan to create 12 million new […]

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