The new study of Mitt Romney's tax plan by the nonpartisan Tax Policy Center is getting a lot of media traction this morning, mainly because it finds that it would cut taxes dramatically on the richest five percent while raising them on everyone else.
But there’s a specific finding buried in the report that, over time, may loom large in Campaign 2012: Romney's tax plan would result in a $2,000 tax increase on middle class families.
As Lori Montgomery put it this morning, the study, which was conducted with the Brookings Institution, seemed to “bend over backwards to be fair to the Republican presidential candidate.” Here’s what this means. Romney has not said which loopholes and deductions he would close to offset the cost of his 20 percent across the board tax cut, which would disproportionately benefit the wealthiest taxpayers.
So the question is, What happens to the after-tax income of different groups when you make assumptions about which loopholes would be closed? The study deliberately began with the assumption — favorable to Romney — that his plan would target those loopholes which favor the wealthy first. But even presuming that, the study found, his plan, in order to remain revenue neutral, would also have to close loopholes that currently benefit those who make less than $200,000 — with the result that their after tax income would go down.
This is more pronounced for families who make less than that amount. Some of the loopholes that would have to be closed to make Romney’s plan revenue neutral — such as the mortgage interest deduction — benefit those families more than Romney’s tax cut would. The study’s conclusion: Romney’s plan would result in a $2,000 tax increase for these families.
“The study shows that making Governor Romney’s tax plan revenue neutral would require eliminating tax preferences for middle and lower income families, reducing their after tax income by an average of $2,000,” Roberton Williams of the Tax Policy Center tells me.
This is likely to be focused on relentlessly by Dems. Indeed, Obama said this of Romney’s plan today: “the average middle-class family with children, according to this study, would be hit with a tax increase of more than $2,000.”
Romney says in every conceivable venue that he will cut your taxes. That’s simple and easy to understand. Obama and Dems have struggled to break through with the message that Romney won’t say how his tax cuts would be paid for. Either they would explode the deficit, or they would have to be offset by closing tax loopholes that benefit the middle class — meaning that middle class taxes could go up to pay for huge tax cuts for the rich. This new study — and particularly the $2000 tax hike finding — could help cut through the noise and change the debate.
UPDATE: Jed Lewison posts video of Obama pouncing on the study today.