Romney Reveals Voodoo Economics and Fuzzy Math

In case you missed Chris Hayes’ “UP” this Saturday morning, please review the following segment.   It might be hard to find a more succinct summary of the Shell Game which Governor Romney is playing with his tax proposal — essentially the  “Bush Tax Cuts on Steroids.”   Governor Romney’s tax plan is a three part talking point scheme each part of which distracts from the mendacity of the other two.

As Mr. Hayes observed, they are actually mutually exclusive. For example, you can’t achieve revenue neutrality by lowering taxes for everyone.  Nor can you lower taxes for everyone without lowering them for upper echelon income earners.   If President George H.W. Bush was correct in labeling Supply Side economics as a form of Voodoo, then we might just as easily label Governor Romney’s tax proposals Sleight of Hand.

How to sell the notion that tax cuts for the extremely wealthy are Good for All of Us?  Haye’s points out the crucial element: “The wealthiest Americans will pay a higher percentage of taxes than they do today. Not a higher percentage of their income in taxes, since that would be an outright lie. This is a very common bit of conservative misdirection used to hide the distributional unfairness of their tax cuts.”  Here’s what the distributional effect of the Romney Tax Plan looks like if it were truly revenue neutral:

But, but, but “everyone’s taxes will be lower.”  However, NOT if the proposal is to be revenue neutral— you don’t get all three walnuts — pick one. If you firmly believe that lowering taxes for the upper level income earners in the United States will cause a tsunami of start up businesses and business expansion, then by all means pick the “everyone’s taxes will be lower” shell.  BUT, remember that all Governor Romney is promising is that the rich won’t pay a lower overall percentage of the revenue collected by the I.R.S. — NOT that they won’t see a reduction in their INDIVIDUAL tax liability.

There is no revenue neutrality in Governor Romney’s plan, at least not if you want one of the other two shells.   Something has to give, and this is the point at which his plan becomes extremely fuzzy.

Romney said in the debate that his plan wouldn’t cut enough tax breaks to offset all of his tax cuts. Economic growth, he said, would be generated by his tax plan and make up the difference. He hasn’t specified how much.”  [BusinessWeek] (emphasis added)   So, how much would the U.S. economy need to grow in order to make up the difference between his plan’s reductions in tax breaks to offset the tax cuts?  Who knows?  And, Governor Romney’s not providing the information necessary to properly analyze the results.

The other problem with Governor Romney’s shell game fuzzy math is that he has yet to specify which deductions would be capped or eliminated under his plan.  Vague promises about “working with the Congress” to determine the final shape of his tax policy are all well and good, as in “the devil’s in the details but the angel is in the policy.”  However,  without specificity there’s no way to make his numbers add up to anything even roughly approximating revenue neutrality.

If we assume, rationally, that the lack of real revenue neutrality in the former Massachusetts Governor’s tax policy means what a reduction in revenue always means — program cuts — then the cuts might very well look something like this:

In other words, the American public is being asked to pick a shell, which ever one sounds the best to the undiscerning ear, disregard the other two, and the result will most likely be:

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Filed under 2012 election, Economy, Politics, Romney, Taxation

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