Romney’s Tax Lie
People are now coming away with the impression that Romney is vowing not to cut taxes for the wealthy, and instead focus only on middle-class tax cuts. In fact, many people now are convinced that Romney wants to not only leave the base tax levels for rich people unchanged, but to get rid of all or almost all of their deductions and loopholes. The impression is that he’ll actually make wealthy people pay more in taxes!
In reality, this is a very similar con game to the one Bush played in 2000; make it sound like the tax cuts are aimed at the common man, then shovel the lion’s share to the rich. The difference is that Romney is being even more dishonest than Bush was.
The fact is that Romney has not changed his tax plan one bit. He still plans to cut taxes 20%, or one-fifth, across the board, which is a far bigger and better deal for rich people whose income may still fall under the highest marginal tax rate. In addition, he would eliminate capital gains taxes (a major source of income for rich people cut to zero), eliminate the millionaires- and billionaires-only estate tax, and slash corporate tax rates by almost 30%. And, oh yeah, he would scale back tax increases on wealthy people contained in the ACA, and would extend both of the Bush tax cuts which mostly favor the wealthy. More good news for rich people.
In other words, he will not only cut taxes for rich people, he will cut taxes mostly for rich people. The vast majority of savings go to millionaires and billionaires.
For more details on how Romney’s tax plan will be massively slanted to favor rich people, see the analysis below the rule. But for right now, I want to address how it is that Romney is making people think he’ll somehow raise taxes on wealthy people, when the exact opposite is true.
In short, he’s playing with language. Pay close attention to the exact wording, and keep in mind that each statement is made within a context which is almost certainly different than what you think it is.
Here he is at the first debate:
My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high- income people. High-income people are doing just fine in this economy. They’ll do fine whether you’re president or I am. … I will not reduce the share paid by high-income individuals.
And at the second debate:
Now, how about deductions? ‘Cause I’m going to bring rates down across the board for everybody, but I’m going to limit deductions and exemptions and credits, particularly for people at the high end, because I am not going to have people at the high end pay less than they’re paying now.
The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects. So that’ll stay the same.
Middle-income people are going to get a tax break.
… And I will not — I will not under any circumstances, reduce the share that’s being paid by the highest income taxpayers. And I will not, under any circumstances increase taxes on the middle-class.
Emphasis on the word “share” is mine. And for a reason.
He’s not saying that he will not lower taxes for the rich; he’s saying that he won’t reduce the share of taxes they pay. And in that, he is only referring to the “shares” in the context of the 20% across-the-board cut. That statement does not include the capital gains and estate tax eliminations, nor does it count the tax cuts for wealthy people gained by eliminating the ACA, nor does it count the money they will gain through the corporate tax cuts.
Get it? Everyone gets their share cut by 20%, so no one’s share is cut less than anyone else’s. The 60% thing? A fake measurement which can be jiggered to mean whatever you want it to mean, and even at that, is still probably an outright lie based on assumptions which will absolutely not be true under his tax plan.
But wait—Romney clearly said, “I am not going to have people at the high end pay less than they’re paying now.”
Listen carefully—he said that in the context of deductions. And true enough, he has said he’ll cut deductions, but that won’t matter because the deductions rich people lose will be dwarfed by the other tax cuts Romney is giving them. So they will be paying a lot less than now… but not because of deductions!
What Romney is saying is very carefully phrased, so he can make many statements which sound like he’s only cutting taxes for the middle class and is not cutting anything for the rich—when in fact, the exact opposite is true.
This is what you can call “masterful deception.” People are buying it. And the media, for the most part, is not calling him on it.
Now, how about the details of Romney’s tax plan? How will this be a “fair” cut where no one pays any less a “share” than anyone else?
Income over $388,350 is taxed at 35%; Romney would cut that by one-fifth to 28%, a 7% cut.
However, if you make less than $35,350, your one-fifth reduction brings your 15% margin down to 12%, or a 3% cut.
Worse, the 7% cut applies to all income over $388,350, which, if you make tens of millions of dollars a year, is almost all of that. But if you make less than $35,350, then your first $8700 only gets a 2% cut, and the remaining $26,650 gets a 3% cut.
So, which is bigger: a 7% cut on millions of dollars, or a 3% cut on tens of thousands of dollars? Let me get out my calculator….
Loosely speaking, someone making $10 million in regular income stands to gain close to $700,000, while someone making $40,000 will get less than $1000.
But that’s not all. Romney would cut corporate tax levels from 35% to 25%, a reduction of 29%; most of that money would go to rich people. He would eliminate—cut to zero—the capital gains tax, which is a primary source of income for many rich people. Many who are wealthy are actually capable of designing their income (e.g., choosing stock options instead of salary) so it is more capital gains than not. In addition, he would eliminate the estate tax, which currently only taxes inheritance income beyond $5 million.
All three of these are tax breaks for the wealthy, and all are even bigger than the additional 20% cut on normal income that Romney would also give to rich people. And they keep the Bush tax cuts. And they get the ACA taxes cut.
All of which means that the tax rate for someone making tens of millions of dollars could fall to zero. Making the elimination of deductions meaningless. Remember that Romney paid 14%; he did that in large part due to the 15% capital gains tax, which would drop to zero under his plan. Romney would pay almost nothing in taxes.
In the meantime, if you earn $40,000 a year, Romney’s break could save you $935.
But if your name is Mitt Romney, you could save millions. And if your name is Hilton, or Walton, or Koch, you could save billions.
Now, Romney says he’ll cut deductions and loopholes to pay for it. The problem is, he won’t say which ones. The only thing he has said is that he won’t cut middle class deductions, or at least not anything significant.
The problem is, the math doesn’t work out. That now-famous Tax Policy Center study crunched the numbers, and even assuming the most favorable outcome—that Romney really does intend to get rid of every tax loophole for the rich—he would still have to cut into middle-class deductions to the tune of $2400.
Romney can’t have it both ways. Either his first-year tax plan will increase the deficit by hundreds of billions of dollars a year for the next decade, or he will have to hike taxes on middle class families up to more than double what they save from his tax cuts.
And the poor, by the way, get nothing. Romney is true to his word, he is not paying any attention to the 47% at the bottom. Oh, they’d stop getting food stamps. Because we can afford to cut taxes for billionaires to virtually zero, but we can’t afford to buy milk or bread for starving people.
After all, Romney was quite clear: they are victims. He wasn’t kidding.