Today’s Reno Gazette-Journal reported that $30,483,190 was spent on political television ads in the Reno market this year. That is almost five times as much as was spent in the 2008 election cycle. It is too bad that money did not buy more truthful information for the voters. I wrote about deceptive ads back August, and the situation has not gotten better in the last two months.
I think the most persistent lie – in television and internet ads, and in multiple speeches – is President Obama’s interpretation of Mitt Romney’s plan for tax reform. Mr. Obama and his campaign ads consistently claim that Romney would raise taxes on middle-class families by $5000. While my research turned up possible problems with the various parts of Romney’s plan balancing, there are no specific facts that could lead to the claim that Romney’s plan must raise taxes on the middle-class.
The Tax Policy Center analyzed Romney’s plan. This is what they concluded:
TPC’s analysis measures the change in tax liabilities against two alternative baselines: current law, which assumes that the 2001-10 tax cuts all expire in 2013 as scheduled, and current policy, which assumes that the 2011 law is permanent (except for the one-year payroll tax cut and temporary investment incentives).3 Compared with the current law baseline, the Romney plan (absent base broadening) would cut taxes for about three-fourths of taxpayers by an average of more than $7,000.
In contrast, compared with current policy, about 11 percent of tax units would see their 2015 taxes go up an average of nearly $900 while 70 percent would get tax cuts averaging almost $4,300. The tax increases reflect the expiration of three provisions enacted in 2009: the American Opportunity Tax Credit and the expansion of the earned income credit and the child credit.
There are some problems with the TPC analysis:
* Romney’s plan does not include every detail necessary for good analysis. The Tax Policy Center said, “Because Gov. Romney has not specified how he would increase the tax base, it is impossible to determine how the plan would affect federal tax revenues or the distribution of the tax burden.” Therefore they had to speculate about missing details and that speculation could be wrong.
* Mitt Romney has called for cuts in federal spending and eliminating duplicate programs across government agencies. Because Romney has not given specific information on cuts, the Tax Policy Center analysis does not take that into account.
* Most importantly, if tax increases would be necessary to balance the budget, who says the increase would be in middle-class rates? There is nothing in the Romney plan that requires this, nor is there anything that prevents tax increases in upper-class rates or increases across the entire tax spectrum. (But since Romney has called for spending cuts, tax increases seem unlikely.) The Obama campaign’s insistence that only the middle-class would suffer is a scare tactic and not backed by facts.
The Tax Policy Center also analyzed President Obama’s 2013 federal budget proposal. This plan does have all the details necessary to do an accurate assessment. Here is what they found:
Relative to current law [allowing the Bush tax cuts to completely expire], the entire package of proposals would reduce taxes in 2013 for nearly three-quarters of all households and raise taxes for about 6 percent. People at both ends of the income distribution would be least likely to see their taxes go down: only about 30 percent of both those in the bottom quintile (20 percent of tax units) and those in the top 1 percent would see their taxes go down. At the same time, 71 percent of those in the top 1 percent would face a tax increase, compared with just 1 percent of those in the next-to-top quintile (60th through 80th percentiles). On average, taxes would drop an average of more than $1,300 in 2013. Among income groups, only the top 1 percent would see an average tax increase—more than $18,000.
The story is quite different measured against a current policy baseline that is essentially the tax law in place for 2011. Against that baseline, only 12 percent of taxpayers would see their taxes go down in 2013 under the president’s proposals while more than a quarter would experience a tax increase. The average federal tax bill would rise by about $800. People in the lowest income quintile would be least affected—less than 15 percent would experience any tax change—while virtually everyone in the top 1 percent (97 percent) would see their taxes go up by an average of almost $98,000, cutting their average after-tax income by roughly 8 percent.
Mr. Obama has made no secret of his desire to raise taxes on wealthier Americans. But he has been deceptive on the campaign trail, always citing “millionaires” or “the wealthiest Americans” when his actual plan is to increase taxes for anyone earning over $250,000 a year.
What I take away from the Tax Policy Center assessment of both candidates’ plans is that much depends on what happens to the Bush tax cuts, the marriage penalty, the Alternative Minimum Tax and investment tax rates. While whichever man wins the election can make proposals, the decisions will ultimately be made in the (currently dysfunctional) Congress. The Tax Policy Center does not back up the Obama campaign claim of a $5000 middle-class tax increase under Romney.
Please do not vote based only on predictions of Romney tax increases. If we believe President Obama’s promise to raise taxes on the wealthy, we should extend the same belief to Romney’s promise to reduce taxes for the middle-class. Neither man can guarantee his plan will become law, but I think we can believe that each will try diligently to convince Congress to go along with their plan.