The Romney campaign has yet another new blueprint for its sketchy tax plan—a 2006 study from the Joint Committee on Taxation. But—like the many other studies, op-eds and blog posts they cite—the JCT study fails to show how their plan adds up. Just the opposite: it describes a large tax increase for the middle class.
Here’s why: The so-called “Romney-style plan” JCT looked at was a revenue-neutral tax reform plan that cut income tax rates across the board. To ensure that this plan doesn’t add to the deficit, JCT assumed that “all personal exemptions, itemized deductions, personal credits except for the earned income credit, and all above-the-line adjustments to income except for retirement savings deductions and the deduction for self-employment taxes would be repealed.”
In other words, every family at all income levels would lose all of their mortgage deduction, charitable deduction, and deduction for state and local taxes. They would lose their child tax credits, their college tax credits, and tax credits that help them pay for their childcare. For the first time, they would be taxed on the health insurance they are provided by their employers. They would even lose the personal exemptions available to every taxpayer. The end result: large tax increases for the middle class in order to pay for tax cuts for the wealthy.
This study doesn’t support Romney’s plan—it actually proves the worst possible scenario. A widely cited Tax Policy Center report concluded that Romney’s plan would raise taxes on middle-class families with children by $2,000 by taking away about 60% middle class tax breaks. But the JCT report assumes that these families lose all of these tax breaks and more. In its report, the Joint Committee on Taxation itself wrote that the plan would result in a “redistribution of individual income tax liability from high wage earners to low wage earners”—in plain English, that means that the wealthy pay less in taxes and everyone else pays more.
And while the Romney campaign sometimes argues that growth can help pay for these tax cuts, the JCT analysis projects modestly higher growth and employment only because it is fully paid for before taking into account that growth. The report does not, like the Romney campaign, assume that growth can fill a deficit hole created by unpaid tax cuts. In addition, the study notes that it does not take into full account ways in which this tax plan could slow growth, including the impact of removing the mortgage deduction on the housing market and the full effect of taking away tax credits from working families.
Of course, if this reflects Romney’s plan, he should come out and say it. But neither he nor his campaign should pretend it brings his “sketchy deal” any closer to adding up.