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Posted at 03:40 PM ET, 10/02/2012

Paul Ryan retreats deeper into mathematical fantasy

Buzzfeed posts video of Paul Ryan answering questions at a town hall meeting, and the exchange that’s getting some attention is one in which a constituent pressed him for specifics on his plans.

But there's another moment that deserves more attention. In it, Ryan finally did get a bit more specific about the middle class deductions the Romney plan would not target to pay for its enormous tax cuts.

This makes the Romney plan’s math even harder — and more likely to explode the deficit. Here’s the key bit (at around the 5:30 mark), in which Ryan is talking about taxes on the rich:

“If you subject more of their income to taxation — more of their income is taxed — and that allows us to lower revenues for everybody across the board. That means middle class taxpayers have lower tax rates, and there’s plenty of fiscal room to keep these important preferences for middle class taxpayers — you know, like charitable donations, or buying a home, or health care. Every time we’ve done this, we’ve created economic growth.”

Ryan seems to be saying the Romney plan won’t touch the charitable deduction, mortgage interest deduction, or exclusion for health insurance enjoyed by middle class Americans. He doesn’t take them off the table officially, but he articulates that as a specific goal.

But this will make it even harder for Romney and Ryan to keep their pledge to make their plan revenue neutral. Remember, the Romney plan would cut taxes across the board by 20 percent for everyone, and would supposedly pay for those tax cuts by targeting loopholes and deductions enjoyed by the rich. But the nonpartisan Tax Policy Center found that this is not mathematically possible — to maintain the plan’s deficit neutrality, you would have to target loopholes that benefit the middle class, too, hiking their tax burden. Yet here Ryan seems to be ruling some of them out as targets.

“This does make the math harder, because he’s taking things off the table that would generate revenue to pay for the rate cuts,” Roberton Williams, a senior fellow at the Tax Policy Center, told me.

Catherine Rampell took a hard whack at the Romney plan’s math. Across the board tax cuts of 20 percent would result in $251 billion less in revenues per year from households over $200,000. Because Romney would leave preferential tax rates on savings and investing, that would leave only $165 billion per year in “available tax expenditures that can be eliminated from this same group,” which would mean “an $86 billion shortfall.” Guess who would pay for that?

Or, as Jed Lewison puts it: “Unless Romney reduces the size of his proposed tax cut for top earners or decides to explode the deficit, under his plan the middle class will shoulder a great share of the tax burden. It’s just math — it’s really that simple.” Kevin Drum has more.

By seeming to take some middle class deductions off the table, Ryan made the math even more hallucinatory. This might be good politics — Ryan is getting more specific in promising not to raise middle class taxes — but it further confirms that Romney and Ryan have completely jettisoned deficit neutrality as a goal of their plan, and that they are selling people a fiscal bill of goods that doesn’t pass the laugh test.

By  |  03:40 PM ET, 10/02/2012

 
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