Fair Share of Taxes ... How About the Truth?

The Romney Hood Fairy Tale sets the record straight about what the rich pay in taxes:

"As he escalates his class war re-election campaign, President Obama has taken to calling Mitt Romney's economic plan "Robin Hood in reverse" or "Romney Hood." The charge is that even though Mr. Romney is proposing to cut tax rates for everybody across the board, Mr. Romney will finance this by imposing a tax increase on the middle class. His evidence is a single study by the Tax Policy Center, a liberal think tank that has long opposed cutting income tax rates.

The political left always says Daddy Warbucks gets all the tax-cut money. So this is hardly news, except that the media are treating this joint Brookings Institution and Urban Institute analysis as if it's nonpartisan gospel. In fact, it's a highly ideological tract based on false assumptions, incomplete data and dishonest analysis. In other words, it is custom made for the Obama campaign.

The heart of Mr. Romney's actual proposal is a 20% rate cut for anyone who pays income taxes. This means, for example, that the 10% rate would fall to 8%, the 35% rate would fall to 28% and all the brackets in between would fall as well. The corporate tax would fall to 25% from 35%. . . .


Second, the Romney campaign says it expects to increase revenues by increasing the rate of economic growth to 4%, up from less than 2% this year and in 2011. (Separately from tax reform, but clearly relevant to budget deficits, Mr. Romney says he'd gradually reduce spending to 20% of the economy from the Obama heights of 24%-25%.)

The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing.

Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase.

The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose. . . .

So on four separate occasions what TPC says is "mathematically impossible"—cutting tax rates and making the tax system more progressive—actually happened. Hats off to the scholars at TPC: Their study manages to claim that what happens in real life can't happen in theory.

The TPC analysis also fails to acknowledge how highly dependent the current tax system is on the very rich. As the Tax Foundation explains in a recent report based on CBO data: "The top 20 percent of households pay 94 percent of federal income taxes. The bottom 40 percent have a negative income tax rate, and the middle quintile pays close to zero."

This reality is treated as a state secret in Washington because it refutes Mr. Obama's campaign theme that the rich are undertaxed. . . .

Another reality is that more than one-third of Americans pay no income tax. Many in this group contribute payroll taxes, but for most their only connection to the income tax is to receive refundable tax credits (in the form of a check) that are effectively government payments. This is the basis for the Tax Policy Center's wild claim that the Romney plan raises taxes on those who earn less than $30,000—a group that now has a negative tax liability.

The claim is that reducing various refundable tax credits that are cash payments from the government are a "tax increase." By this logic, reducing unemployment benefits or food stamps would also be a tax increase. . . .

What the Obama campaign and its acolytes at the Tax Policy Center are really saying is that tax reform that reduces rates and makes all income groups better off is impossible. This is a far cry from what Democrats used to believe, going back to Jack Kennedy in 1964 and in the 1980s when prominent Democrats Bill Bradley, Dick Gephardt and Don Rostenkowski helped to write the 1986 tax reform.

The Obama Democrats, by contrast, favor income redistribution and raising rates on the wealthy for their own partisan political sake, no matter the damage to growth, the cost in lost revenue, or a less progressive tax code as the rich exploit loopholes.

The great irony is that the candidate most likely to raise taxes on the middle class is Mr. Obama. He could raise every tax on the rich he proposes and still not come up with enough revenue to finance the increases in spending he wants in a second term. Where do you think he'll turn then?

Summing Up

Romney Hood indeed.

Today the top 20% pay 94% of federal income taxes.

Why not just make it 100%?

Then the 80% can outvote the 20% and keep the government growing exponentially until, that is, we become Greece and are unable to tax or borrow any more.

Politics sucks.

Thanks. Bob.