Mitt Romney's tax plan works arithmetically. How do we know? He and Paul Ryan have told us so. And if their word isn't good enough, well then there are no less than six independent studies which confirm that his tax plan clears that very basic hurdle of obeying the laws of mathematics. But here's the problem: I happen to have seven—count 'em, seven!—studies which have looked at Romney's six studies and concluded that they don't say what he says they say. Or as Bloomberg's Josh Barro put it more simply: "None of the analyses do what Romney's campaign says: show that his tax plan is sound."
I'll get to the various studies in a moment, but first a few words of definition. In case you're not familiar with it, Romney's tax plan pledges to cut income tax rates by 20 percent across the board; get rid of the estate tax and the Alternative Minimum Tax; maintain progressivity; and pay for these rate cuts by eliminating tax loopholes, but not ones that provide incentives for savings and investment. While Romney has been very specific about which taxes to cut, he and Ryan have roundly refused to specify which loopholes they would eliminate.
In August, the nonpartisan Tax Policy Center ran the numbers for Romney's plan and concluded that it could not work mathematically. Specifically, they found that the wealthy would gain more in tax cuts than they would lose in closed loopholes while the opposite would be true for the middle class—in order to make the plan deficit neutral, those in the middle would lose more in tax loopholes than they would gain in tax cuts. (Separately, Congress's nonpartisan Joint Committee on Taxation recently estimated that repealing a number of the largest tax loopholes would pay for a 4 percent across the board tax cut.)
That study prompted a series of responses from the right which make up the main body of the cited Romney "studies." Which brings me to the next definitional issue: What exactly constitutes an independent study? Romney takes a rather broad view on this matter. The former Massachusetts governor's half-dozen "studies" include three blog posts and an op-ed, for example—not exactly what the term "study" connotes. (And it's worth noting that in September, Romney was citing five studies, which at the time included a pair of Wall Street Journal editorials.)
In addition, as PolitiFact notes, the, ahem, studies "come from people or groups with ties to Romney." Two come from a Romney campaign adviser, while "three come from conservative think tanks, the Heritage Foundation and the American Enterprise Institute, which have analysts who advise the Romney campaign." The Tax Policy Center, on the other hand, not only doesn't have similar ties to the Obama campaign, but one of the lead authors of its study, was a senior staff economist on President George H.W. Bush's Council of Economic Advisers.
So Romney's six studies have in turn been, err, studied. I'll get into the details in a second, but suffice it to say that the general conclusion reached by the seven "studies" I found (in the interest of egalitarianism I'll use the same broad definition as the Romney campaign) is that the Romney plan remains unsupported. On September 9, for example (when Romney was only citing five studies), PolitiFact ruled Romney's claim "mostly false;" on September 27 (still only five studies), The Washington Post's Dylan Matthews concluded that "none of the responses to the [Tax Policy Center] study have disproven" it, because "all either use a different definition of the middle class [than Romney], rely on inappropriate estimates of growth caused by Romney's plan, or else violates Romney's promise to preserve the savings and investment incentives." On October 11, during the vice presidential debate, PolitiFact updated its earlier fact-check of the "five studies" claim and looked at the six studies that Ryan cited; even with the new material, the group concluded that the assertion was, again, "mostly false." At the same time the Post's Matthews, in the live blog of the debate run by the paper's WonkBlog, discredited the claim again. "I can't believe we have to keep saying this but no, six studies did not say that," he wrote. (If it seems cheap to count each of the PolitiFact and Washington Post refutations as single blog posts, keep in mind that the Romney campaign does something similar, more below.) The next day, October 12, The Atlantic's Matthew O'Brien published an assessment under the headline, "The 6 Studies Paul Ryan Cited Prove Mitt Romney's Tax Plan Is Impossible." (It's worth noting that one of the studies O'Brien refutes is a Romney campaign white paper, which is in fact not one the "studies" the campaign cites.) Bloomberg's Josh Barro published an assessment of the "six studies" that same day, and concluded, as I mentioned above, that none of the analyses prove Romney's tax plan adds up. And finally on Monday of this week, a blog post on Reason.com ("Free minds and free markets") by Peter Suderman, a senior editor at the magazine, concluded that
no one has shown an obvious way for this to work. The math is difficult at best. The same goes for the politics. The combination certainly makes the plan's combo of promises implausible, and probably effectively impossible.
The Washington Post's Ezra Klein yesterday neatly summarized the giant and very relevant question this raises about how the Romney campaign operates. He wrote:
It’s worth pointing out the brazenness of the Romney campaign’s talking point. They know four of their six studies aren’t, even in the loosest definition of the term, “studies.” They know two of the four are duplicates. They know three of the six define “high income” as above $100,000, and their results thus imply a tax increase on taxpayers their candidate has publicly defined as middle class. And yet they keep saying it. Because why not? How can any voter tell the difference between studies that add up and studies that don’t?
Parenthetically you could tell from President Obama's debate performance last night that this is a cold truth the Obama campaign has absorbed--that's why the president didn't go down the arguing-about-studies rabbit hole: Ultimately he and his team must realize that while they have facts on their side it's too easy for Romney to muddy the waters.
For the very masochistic, I've listed below the six Romney "studies" and some of the flaws that have been pointed out in them.
Matt Jensen, American Enterprise Institute, "How the Tax Policy Center could improve its Romney tax study." Jensen argues that the Tax Policy Center should have included a couple of tax incentives on the chopping block which it had ignored on the ground that they promote savings and investment (which Romney has pledged to preserve); he also said that the Center should define middle class as those making less than $150,000. But Romney himself has defined the middle class as those making $200,000 or less and as Matthews notes, the Center later argued that even eliminating those exemptions (which would run contrary to Romney's principle of protecting incentives for savings and investment) would mean cause taxes to rise on those making $200,000.
Martin Feldstein, Harvard University, "Martin Feldstein: Romney's Tax Plan Can Raise Revenue" in the Wall Street Journal. Feldstein, a Romney campaign adviser, sets the high income bar at those making $100,000 or more—far less than Romney's $200,000 level. "The Romney campaign, therefore, is dishonest in saying Feldstein's analyses 'confirm the soundness' of Romney's tax plan," Bloomberg's Barro concludes.
Feldstein, "A Reply from Martin Feldstein," on Greg Mankiw's Blog. Again, Feldstein pegs his analysis to a different definition of middle class than Romney.
Harvey Rosen, Princeton University, "Growth, Distribution, and Tax Reform: Thoughts on the Romney Proposal." According to Matthews, Rosen "found that if the Romney plan increases economic growth by 3 percentage points relative to where it would be under current policies—a huge, and many economists think implausible, boost—then Romney's numbers might work out." But, Matthews goes on, Rosen bases his growth estimates on a study which assumes full employment (not a likely circumstance for a Romney plan) and also assumes that the tax cuts are paid for, while Rosen cites it as saying they will pay for themselves.
Curtis Dubay, Heritage Foundation, "Tax Policy Center's Skewed Analysis of Governor Romney's Tax Plan." Dubay argues that the Center mischaracterizes how Romney would handle the repeal of the estate tax, saying that he would change how inherited capital gains are taxed from a "step basis" (where you are taxed on the capital gains since you inherited something) to a "carryover" basis (where you are taxed on capital gains since it was first acquired by whoever left it to you). But, as Matthews and Barro notes, he overestimates how much more revenues that would bring in. And, Matthews correctly adds, "the policy Dubay highlights … is a savings incentive. So Romney has to abandon one of his tax policy commitments to implement them."
Alex Brill, the American Enterprise Institute, "The Romney Tax Plan: Not a Tax Hike on the Middle Class." Brill pokes enough holes in the Center's analysis—a couple of which, Barro notes, are legitimate—to get to within $12 billion of covering the Romney tax plan deficit, and assumes enough economic growth the cover the remainder. But, Barro also observes, Brill overestimates how much money the loopholes he would repeal would bring in, leaving him "well short" of backing up Romney's plan.
And we've heard the growth argument before. Recall the political history of the past 30 years: Ronald Reagan promised that his tax cuts would pay for themselves, and he blew a hole in the deficit which it fell to H.W. Bush and Bill Clinton to close. George W. Bush promised that his tax cuts would pay for themselves and he turned a budget surplus into another large deficit, which—despite what you might have heard—is smaller now than when President Barack Obama took office. Hopefully having been fooled twice voters won't again buy the GOP promises of tax cuts magically paying for themselves.