Using his analysis, Brill outlines his reasons for why that $86 billion in tax hikes would not come to pass under Romney’s plan.
For one, he say, the TPC researchers failed to factor in the possibility that Romney could eliminate additional tax breaks that primarily benefit upper-income taxpayers, such as the tax-free treatment of interest on state and local bonds and the tax-free build-up of value in life insurance policies. Taxing that income, Brill writes, would raise about $45 billion a year from wealthy households, reducing the potential tax burden on middle-class households to $41 billion a year.
Romney has not yet given the details of the tax breaks he would eliminate as part of his reform plan.
In its study, the TPC did factor in new taxes on the wealthy that are included in Obama’s health-care initiative. Romney has proposed repealing those taxes — including a new 3.8 percent levy on investment income. But, Brill notes, the candidate “has not suggested that the cost of repeal would be paid for by tax reform.” Instead, Romney wants to repeal the new health-care spending that prompted Congress to levy the tax in the first place.
And so, Brill writes, there’s another $29 billion that doesn’t have to come out of the hide of the middle class. “A $41 billion tax increase shrinks to $12 billion.”
Finally, Brill contends, the TPC’s economic model fails to account for the likelihood that tax reform that lowers rates and simplifies the rules would boost economic growth. “If the economy were to grow just 0.1 percentage point faster per year as a result of the reform,” he writes, “the additional revenue . . . would be approximately $13 billion. The result: A $12 billion tax increase on the middle class actually becomes a tax cut.”
Brill’s analysis is the latest in a flurry of conservative critiques of the TPC study, which Obama added to his stump speech upon its release Aug. 1. The Obama campaign is also using the study to hammer Romney in TV ads.
On Tuesday, William Gale, co-director of the TPC and one of the study’s authors, defended the original report, saying it accurately described the trade-offs that would be required to achieve each of Romney’s five goals for tax reform: lowering marginal rates, repealing the alternative minimum tax, preserving tax breaks for saving and investment, maintaining the current distribution of the tax burden between rich and poor, and maintaining the level of tax collections so as not to increase the budget deficit.