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December 20, 2014

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After dissecting Romney’s economic plan, Tax Policy Center takes the heat

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Steve Marcus

Republican vice presidential candidate Paul Ryan, left, introduces presidential candidate Mitt Romney during a campaign rally at the Henderson Pavilion Tuesday, Oct. 23, 2012.

A small nonpartisan research center operated by professed “geeks” has found itself at the center of a rancorous $5 trillion debate between President Barack Obama and Mitt Romney.

No white paper or policy manifesto put out during the presidential campaign has proved more controversial than an August study by the Washington-based Tax Policy Center, a respected nonprofit that issues studiously detailed tax analyses.

That study found, in short, that Romney could not keep all of the promises he has made on individual tax reform, including cutting marginal tax rates by 20 percent, keeping protections for investment income, not widening the deficit and not increasing the tax burden on the poor or middle class. It concluded that Romney’s plan, on its face, would cut taxes for rich families and raise them for everyone else.

The detailed paper proved kindling for a political firestorm. Romney criticized the center as performing a “garbage-in, garbage-out” analysis, and his campaign accused it of partisan bias. The Obama campaign used the center’s numbers to argue that Romney had proposed a $5 trillion tax cut. Economists jumped on the bandwagon, too, flinging analyses back and forth and picking apart the projections and assumptions in the report.

At the Tax Policy Center, responses ranged from irritation at the partisan nature of some attacks to incredulity over the political hysteria.

“There was this résumé-hunting, White-House-visitor-log” searching feel to the response, said the center’s director, Donald Marron, a former Bush administration economist.

“That was unanticipated,” he added dryly.

In many ways, the report did just what the center was created to do: inject solid numbers into a shifty, accusatory, raucous political debate. The decade-old center — a joint project of the Brookings Institution and the Urban Institute, two nonpartisan grandes dames of the Washington world — was founded precisely to “fill that niche,” Marron said.

“A lot of tax policy discussions are — how to describe them? — people yelling at each other,” he said. “We believe that good information leads to better policy discussions and ultimately better policy outcomes.”

The center’s claim to provide reliable, nonpartisan information comes in part from its staff makeup. It has about four dozen affiliated staff members and scholars — most are economists, several are considered top experts in their fields, and a number have experience in either Republican or Democratic administrations.

It also is derived by virtue of its ownership of a highly sophisticated tax modeling system, one that took about two years to build and has a small coterie of specialists to tend it. The model resembles those used by government offices to forecast the effect of tax code changes, and it relies on about 150,000 anonymous tax returns and a wealth of data on pensions, education, consumer expenditures and economic growth.

“They’re one of the few groups that have this very big, very accurate model,” said Martin A. Sullivan, the chief economist and a contributing editor at Tax Analysts, a specialty publisher. “What they’re doing is just making the best computations available” for others to interpret.

That includes so-called distributional analyses that show how changes to the tax code would alter the relative burden on high-income and low-income families — a dry tax topic yet one of the most politically potent ones of the campaign, given the broader debate about tax fairness and inequality.

The analysis of the Romney proposal has proved highly controversial, not just among politicians, but also among some economists.

Researchers including Martin Feldstein of Harvard and Harvey S. Rosen of Princeton have argued that Romney’s tax math might work if he raised taxes on families making more than $100,000 a year — not $200,000 to $250,000 a year, as he promises — or if his plan gave a strong jolt to economic growth.

“Reasonable economists disagree on” the growth effects of plans like Romney’s, said Alan J. Auerbach, a tax expert at the University of California, Berkeley, who added that he did not see the math working out as currently described. “It matters a lot what kind of reductions you’re making or how you’re paying for tax cuts.”

Others have argued that the Tax Policy Center filled in too many of the holes in Romney’s light-on-detail proposal — making a full analysis impossible and skewing the results of the center’s paper.

“It is not an analysis of Gov. Romney’s plan,” said Scott A. Hodge, the president of the Tax Foundation, a nonprofit research group also based in Washington. “It has been, I think, mislabeled as such and misinterpreted as such. We don’t think there are enough details to analyze.”

He said he believes it is possible to devise a distributionally neutral, revenue-neutral tax reform that cuts rates in the way Romney has described.

The Tax Policy Center said it sought as many details as possible from the Romney campaign. (Its economists said it has a cordial back-and-forth with the economic policy teams in both campaigns, as it did in 2008.) Given the numbers available, it tried to perform the analysis in the most generous way possible and still did not see how Romney’s rate cuts could square with his other goals.

“We wrote a technical, accurate paper given the available information,” said William G. Gale of the Brookings Institution, one of the paper’s main authors. “The criticism that you can’t analyze the Romney tax plan because there isn’t one? That hasn’t stopped other economists from analyzing its growth effects. I like to have substantive discussions about tax policy. The uproar about the paper has not been substantive.”

Many economists across the political spectrum have said they found the report’s conclusions convincing, like Alan D. Viard, a tax expert at the right-of-center American Enterprise Institute.

Sullivan said: “I like tax reform. I want to broaden the base. It’s something I’ve devoted my life to. And I welcome Gov. Romney and the Republicans’ strong push, but the plan doesn’t work out. It’s not mathematically possible.”

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  1. The office I deal with is staffed with economists (Conservative ones at that) and they have been saying the same thing about Romney's economic policies - the numbers don't add up. And, what's particularly frustrating is Romney continues to claim he'll find savings by cutting the size of government, but he refuses to state specifically what he'll cut.

  2. Romney's plan, even if it were mathematically possible, must be based on something. Yet they refuse to tell us or anyone else what they base their analysis on leaving us to wonder if they really have a plan or know what they're talking about.

    One thing for sure, if they reduce the tax rates by 20%, it will affect the taxes paid on future increases in income. In 2010, 93% of the increase in income went to the to the top 1% of taxpayers. If that continues to be true the 1% would be the principal future beneficiary of the reduction in tax rates.

  3. Romney's supporter are the rich, the wannabes, and the no-clues.

    Over half of the US population are no-clues, according to research.

    Ergo, Romney wins (Heaven forbid)!

    Oh well, we survive eight years of Bush.

    This too shall pass.

  4. Look, Mitt Romney's entire campaign promises and actions are not debatable.

    You cannot debate lies and distortions.

    Look! Mitt Romney's campaign is based on lies, distortions, and using misleading statements! All designed to confuse voters, economist, the uninformed, and the informed if your willing to listen to garbage.

    Mitt Romney throws out garbage for discussion, to confuse the public.

    Mitt Romney lets you argue his changing positions, not Him. How can you argue a lie? Stop being stupid American Public!

    Credible people like the Tax Policy Center are wasting their time. Unbeknownst to them, they are spending time on Mitt Romney's unworkable tax plan, lending a hint of credibility to Romney's plans, when in fact there is no credibility.

    Mitt Romney is using places like the Tax Policy Center as a tool to divert attention and confuse the public. Mitt Romney has sprinkled pixie dust on a dreaming public.

    So now, this article is designed to confuse the American Public saying, directly and indirectly, that the Tax Policy Center is not credible and the numbers in Mitt Romney can work. Saying the Tax Policy Center does not know what they are doing!

    This article is designed to create doubt that the lying plan of Mitt Romney can work. The article is screaming with subliminal messages of lies distortions and misleading statements....just like the Mitt Romney's campaign. Figure don't lie, but lairs figure.

    The writers and contributors of this articles has dunk the kool-aid from the Mitt Romney "Jedi mind trick".

    Wrap your head around this:
    President Obama wins re-election by 6 to 8 points.

  5. Who needs the Tax Policy Center, or any newspaper, or any think tank, to know that Romney's proposal does not work? Nobody.

    First, Romney has said ad nauseum that his proposal (I can't possibly call it a "plan", since one cannot have a "plan" without details, and Romney has provided exactly zero details) is "revenue neutral". Does everyone understand what that means? "Revenue neutral" means that if the US Treasury currently brings in $1 from income taxes ("revenue"), that it will continue to bring in $1 from income taxes under Romney's proposal. ("Why bother?" is a perfectly rational reaction).

    Second, Romney said during the debates that the "wealthy" currently pay in about 60% of the tax revenue, and that they would continue to pay in about 60% of the tax revenue under his proposal. For those of you Fox "News"-watching, math-challenged folks, that means the wealthy currently pay $0.60 (if there is currently $1 of tax revenue), and that they would continue to pay $0.60 under the proposal.

    Third, and here's where those math skills come in handy again, if, as Romney says, the wealthy currently pay $0.60, that means that the "everyone else" currently pays $0.40.

    Fourth, and here's the part where it becomes crystal clear to everyone that the proposal does not work, Romney says, under his proposal, the "everyone else" would pay less than they do now. Didn't say how much less, but let's say it's $0.35.

    Summary: $1 of tax revenue today. Proposal is revenue neutral. Therefore, $1 of tax revenue tomorrow. Wealthy pays $0.60 today, and wealthy continue to pay $0.60 tomorrow. Everyone else pays $0.40 today, and everyone else pays $0.35 tomorrow. $0.60 plus $0.35 DOES NOT EQUAL $1.

    Conclusion: The proposal DOES NOT WORK!

  6. The Rmoney Idiotology...

    Debunking the 'Thurston Howell Get's Richer While the Middle-Class Get's the Shaft' Plan by Mitty & Pauly isn't rocket science!

    http://thinkprogress.org/economy/2012/10...

    http://mediamatters.org/research/2012/10...

    http://www.nytimes.com/2012/10/19/opinio...

    http://www.politicususa.com/beneath-romn...

    http://www.motherjones.com/kevin-drum/20...

  7. Someone who believes absolutely that the American Indians are descended from Jews has learned to sell belief, not reality. In spite of every single genetic and scientific study, they still persist and that is called Faith, yet the function is more like insanity.

    His core plans are: an additional $2 trillion in defense spending over the next ten years, or 150% of what Congress set aside for the Iraq war every year. A 20% 'tax cut' for all while eliminating the National Deficit. What is he going to cut? No word on that or his tax returns. Of course his plans don't add up. He is Mr. Secret personified.

    Salesmen and their friends get rich by selling dreams, not caution. Going into Government or starting your own religion are the easiest ways to make real money, by the bucket load, if you have the gift of Gab.