Question about Romney's tax plan

[_cinepro]

Besides, why is reducing revenue so bad?
A reduction in revenue would require the government to re-evaluate itself and its priorities....

Don't forget the federal government has two other options when revenue is below expenses: print more money or borrow. As long as those two are on the table, no introspection needed.

[_Bob Loblaw]

Here's an explanation that makes sense to me:

http://www.nationalreview.com/corner/32 ... uval-levin

Romney has proposed a reduction in all tax rates of 20%, which would reduce federal revenue by roughly $360 billion a year. Over ten years, that’s $3.6 trillion. The Tax Policy Center got from $3.6 trillion to $5 trillion by also including the continuation of the existing Bush tax rates (i.e., Romney’s 20% reduction in each bracket would be from today’s rates) and the repeal of Obamacare’s new taxes in the amount by which he would reduce revenues. But the Bush tax rates are currently in place and the Obamacare taxes haven’t started (and Romney would also eliminate the spending they were intended to fund) so it’s not the case that keeping the former and averting the latter amounts to a tax cut, or at the very least it’s not the case in the same way as the reduction of the tax brackets. More importantly, Romney proposes to make up the lost revenue by reducing tax expenditures (those loopholes and deductions)—whether by capping total deductions etc. at some level designed to affect higher-income people or by working with Congress to pick and choose particular deductions and exclusions. That means, as Romney explained to the president Wednesday, that the rate reductions are not simply tax cuts—some people’s tax burdens (especially in the middle class) would decline, but those of others (with higher incomes) could actually increase some. The point is to have a more efficient tax system geared for growth—a system with lower rates and a broader base. So sorry folks, but between the assumptions of the Tax Policy Center study the Democrats rely on and the nature of what Romney is proposing, you just don’t have a $5 trillion tax cut proposal.

[_beastie]

Here's an explanation that makes sense to me:

http://www.nationalreview.com/corner/32 ... uval-levin

Romney has proposed a reduction in all tax rates of 20%, which would reduce federal revenue by roughly $360 billion a year. Over ten years, that’s $3.6 trillion. The Tax Policy Center got from $3.6 trillion to $5 trillion by also including the continuation of the existing Bush tax rates (i.e., Romney’s 20% reduction in each bracket would be from today’s rates) and the repeal of Obamacare’s new taxes in the amount by which he would reduce revenues. But the Bush tax rates are currently in place and the Obamacare taxes haven’t started (and Romney would also eliminate the spending they were intended to fund) so it’s not the case that keeping the former and averting the latter amounts to a tax cut, or at the very least it’s not the case in the same way as the reduction of the tax brackets. More importantly, Romney proposes to make up the lost revenue by reducing tax expenditures (those loopholes and deductions)—whether by capping total deductions etc. at some level designed to affect higher-income people or by working with Congress to pick and choose particular deductions and exclusions. That means, as Romney explained to the president Wednesday, that the rate reductions are not simply tax cuts—some people’s tax burdens (especially in the middle class) would decline, but those of others (with higher incomes) could actually increase some. The point is to have a more efficient tax system geared for growth—a system with lower rates and a broader base. So sorry folks, but between the assumptions of the Tax Policy Center study the Democrats rely on and the nature of what Romney is proposing, you just don’t have a $5 trillion tax cut proposal.

The problem remains that there is no way to judge the possible efficacy of the "revenue neutral" part of his plan, since he won't specify one single deduction or loophole he'll target. And to make up that kind of tax loss, it would have to be a significant deduction, like home mortgage.

http://www.cnn.com/2012/10/05/opinion/g ... index.html

Politics: 5 things we learned from the presidential debate
Even if all the available tax expenditures were closed in the most progressive manner possible, it would not raise enough revenue among high-income households to offset the tax cuts they would receive. This was true even when we adjusted the revenue estimates to allow for the impact of potential economic growth, and even when we gave the campaign a trillion-dollar mulligan by ignoring the cost of the corporate tax cuts.
As a result, we concluded that if Romney did not impose new taxes on savings and investments, the only way to finance his tax cut proposals and reach revenue neutrality was to raise taxes on households with income below $200,000.

This was not a forecast of what Romney would actually do; it was simply a matter of arithmetic.

So he's not denying that he's proposing a 20% cut, a continuation of Bush cuts, and losing the Obama care revenue. He's just saying that it's not fair to count the Bush cuts and the Obamacare loss as part of his plan, even though it is part of his plan. And he's saying "trust me" in regards to how to make up this revenue loss.

Do you understand why this troubles some people?

[_Jason Bourne]

All tax cuts add to the deficit jason. Come on.

Not if offset by spending cuts. But sure technically less revenue can increase debt isolated in and of itself. But it also depends what is done with loopholes and deduction. The 1986 Tax Reform Act drastically cut rates to 15 and 28%. But Capital gains rates...gone. Accelerated depreciation on real estate...gone. Deducting passive losses from sophisticated tax shelter against active income....gone. Many other loopholes were closed right down. Revenue increased as a result.

[_Jason Bourne]

Is the continuation of the Bush era tax cuts a tax cut? Or is letting them expire a tax increase?

[_beastie]

Is the continuation of the Bush era tax cuts a tax cut? Or is letting them expire a tax increase?

Depends on the date.

But this really is parsing.

[_Bond James Bond]

All tax cuts add to the deficit jason. Come on.

not if deductions are decreased as well, that would offset.
Besides, why is reducing revenue so bad?
A reduction in revenue would require the government to re-evaluate itself and its priorities....unless...you are claiming that the federal government needs to spend more money...or that currently it has "just the right amount"?

I'm all for defense cuts if we're picking stuff.

[_Kevin Graham]

If Romney's economic plan involves changing deductions and "loopholes", it's really weak of him to not be clear about which ones he is talking about.

He could be talking about all of them, and it still wouldn't make a dent. This is what's so insulting about his claim. He really expects the American people to vote stupid.

[_Kevin Graham]

Not if offset by spending cuts. But sure technically less revenue can increase debt isolated in and of itself.

Well following this logic, increased spending plans shouldn't be considered deficit spending so long as someone claims there will be mechanisms employed to boost revenues that will offset the effects of spending. What mechanisms? Well, we don't need to worry about that. We'll just claim they'll exist, and that they will be enough to pay for the spending. In the meantime let's just say this added spending won't add to the deficit. This is ridiculous Jason.

When asked what cuts Romney would make to offset these tax cuts, he brought up Big Bird! I mean is this guy really this dumb? You can toss out PBS and even get rid of the entire food stamp program and you'd still be talking about 1% of the budget. The largest part of discretionary spending has been and always will be Defense spending, and even though we spend more on Defense than the next four countries combined, Romney vows to increase defense spending substantially.

I mean the math simply doesn't work. Not only does he have no viable plan to offset $4.8 trillion in tax cuts over a decade, he is likely to increase government spending just like every Republican before him, despite their lip service claims of reducing it. And you can already hear the drum beats for war against Iran coming from the Right Wing fear mongers, so expect more rhetoric about the threat of nuclear Iran to escalate in the coming months. This is like Bush 2.0, down to the last brass tack.

The 1986 Tax Reform Act drastically cut rates to 15 and 28%. But Capital gains rates...gone. Accelerated depreciation on real estate...gone. Deducting passive losses from sophisticated tax shelter against active income....gone. Many other loopholes were closed right down. Revenue increased as a result.

You really need to watch this video Jason. Bruce Bartlett was Reagan's economic adviser at the time and admits that Reagan increased taxes six times to offset revenue losses from his tax cuts. But all you ever hear about are his cuts. Also, the primary reason revenues increased was due to economic growth, which most economists attributed to the Fed slashing interest rates. Even back then Reagan wasn't taking credit for this. It was the generally accepted wisdom that teh Fed was responsible for it. Only years later after Reagan died did the creative "Think Tanks" (with FOX News propagating it) decide to employ the correlation-causation fallacy by trying to use history to prove Reagan's tax cuts must have boosted revenues.

[_beastie]

Well following this logic, increased spending plans shouldn't be considered deficit spending so long as someone claims there will be mechanisms employed to boost revenues that will offset the effects of spending. What mechanisms? Well, we don't need to worry about that. We'll just claim they'll exist, and that they will be enough to pay for the spending. In the meantime let's just say this added spending won't add to the deficit. This is ridiculous Jason.

Perhaps this is a semantics issue, and people on both sides tend to use semantic ambiguity to aid their cause.

For me, it would be more clear to say, yes, Romney's plan does include a 5 trillion dollar tax cut. The question is whether or not that tax cut will reduce revenue. That is a different issue than whether or not he actually has a tax cut planned. Of course he has a tax cut planned, and reasonable estimates, including the Bush cuts and the loss of Obamacare, put it at 4.8 trillion. So when he simply says this, in the debate:

First of all, I don't have a $5 trillion tax cut. I don't have a tax cut of a scale that you're talking about. My view is that we ought to provide tax relief to people in the middle class. But I'm not going to reduce the share of taxes paid by high-income people. High-income people are doing just fine in this economy. They'll do fine whether you're president or I am.

it sounds like a flat-out lie to people like me. People like Bob hear him saying he does have a huge tax cut, but it will be revenue neutral, so can't really count as a tax cut because it won't reduce revenue. Is that fair?