The WaPo editorial page has been doing exemplary work on the mathematical impossibility of Mitt Romney’s tax plan. Each time the campaign tries to pull another rabbit out of their hat, they’ve evaluated the word salad and found it wilting.
Most recently, team Romney lurched into “pick-a-number” mode—now there’s some rigorous analysis—where they throw out some cap on itemized deductions, most recently $25,000, to pay for the $5 trillion cut (over 10 years). But that just sends the TPC wonks back to their laboratory to once again find that in fact, 2+2 doesn’t amount to five. The $25K cap yields $1.3 trillion, once again proving that you can’t simultaneously lower rates 20% across the board and achieve revenue neutrality without raising taxes on those below $200K or blowing up the deficit.
I particularly applaud the WaPo’s calling out the campaign’s spokesperson who claimed that paying for their ten point corporate tax cut “…would be handled separately.” From the editorial:
Lowering the corporate rate from its current 35 percent to 25 percent, as Mr. Romney advocates, would cost about $1 trillion over the next decade. Again, how would that cost be “handled separately”?
I love that…handled separately…isn’t that reassuring? A more accurate remark would have been, “we’re going to ignore that separately.”
But the WaPo then goes unfairly to the “pox-on-both-houses” place when it claims that President Obama has not suggested explicit tax expenditures/loophole closures to pay for his corporate tax rate reduction, from 35% to 28%. In this document that introduced the administration’s corporate tax reform ideas, they explicitly call for eliminating an inventory accounting tax gimmick that costs the Treasury $74 billion over ten, oil and gas subsidies ($27 billion), the carried interest loophole, and a bunch of other cats and dogs that amount to over $140 billion.
Beyond that, however, they raise significant revenue (another $148 billion), and just as importantly, close down some distortionary incentives to offshore production, by closing international taxation loopholes. Moreover, their document suggests that some big ticket credits and deductions, including accelerated depreciation and tax preferences for debt over equity financing should be on the table.
How is that anywhere near analogous to the absence of specificity from the Romney campaign on their tax plan? So while I give the WaPo kudos for scrutinizing Romney’s tax math, the double pox formulation doesn’t work here. At the very least, they need to read the administration’s white paper and explain why I’m wrong.