Posted by Bob Lord
The lies just keep on coming from the Romey campaign, but the one I heard over the weekend, and again this morning, was a whopper that bears special attention. Romney now is claiming that his tax plan would not cut taxes for high income taxpayers. According to Romney, he would eliminate loopholes that benefit mainly high income taxpayers, which would offset the benefit of a lower rate.
Here's the glaring problem with that. The only existing tax preference item that disproportionately benefits taxpayers at the very top is the lower rate for capital gains and dividends, and Romney has been unswerving in his commitment to keept those rates at their current levels.
As Bill Clinton says, it's just arithmetic. If someone who makes $100,000 per year pays $16,000 in mortgage interest, he gets a substantial reduction (in percentage terms) in his tax bill. But what about the guy who makes $10 Million per year. The most he could deduct in mortgage interest would be $50,000 or so, becasue the interest on any borrowing over $1 Million is not deductible. And most folks at that level don't even have mortgages. Even if Mr. $10 Million did carry a mortgage, the deduction only would reduce his tax bill by one half of one percent, whereas the deduction reduces the tax bill for Mr. $100,000 by twenty percent or more. And the same analysis would apply to most other itemized deductions.
Of course, what Mitt fails to mention is that his plan would eliminate both the estate tax and the alternative minimum tax. Is he telling us those changes aren't going to reduce taxes on high income taxpayers either? That's a tough sell. You can argue that a reduction in the rate of income tax will be offset by the secret deductions you're going to eliminate. But that logic doesn't apply when you're proposing to eliminate a tax (the estate tax) entirely. That's reducing the rate to zero. And it doesn't matter how many deductions you eliminate, you can't recoup the lost revenue if the rate is zero.
What happens, however, if we accept what Mitt is telling us? It seems that he wants us to believe his tax plan was conceived for the purpose of tax simplification only, yet would spur huge economic growth. And why is that? Some wealthy taxpayers would pay more, some would pay less, with no net change in the total tax burden of the wealthy. Hard to see how that would drive growth. Oh wait, I forgot. The fees paid to tax lawyers and CPAs would decrease because of the vast simplification Mitt envisions, thereby leaving the "job creators" with huge additional amounts to inject into the economy. Now it all makes sense.