Critics of presidential candidate Mitt Romney say his plan to lower or eliminate taxes and deductions is “mathematically impossible.”
Critics base their claims on a study from the Tax Policy Center, a part of the Brookings Institution, according to Feldstein’s article in the Wall Street Journal. The study analyzed personal tax revenues and liabilities incurred by eliminating the alternative minimum tax for each income level in 2015.
“Careful analysis shows this is not the case,” Feldstein said in his article. “Such forecasts are inevitably speculative.”
Critics claim the 20 percent cut in tax rate would cause a $181 billion revenue loss if the new rates didn’t change taxpayer behavior.
Feldstein put Romney’s plan to the test with 2009 IRS data. He found that because the plan would raise taxable income by about 5 percent, it would only cause a $148 billion drop, not $181 billion.
Romney’s plan to eliminate tax on interest, dividends and capital gains for married couples earning below $200,000 would cause an additional $15 billion loss, according to the article.
“It is impossible to calculate the exact effects of the future reforms since Gov. Romney hasn’t specified what he would do,” Feldstein said in the Wall Street Journal column. “But refuting the Tax Policy Center’s assertions doesn’t require that. It only requires knowing if enough revenue could be raised from high-income taxpayers to cover the $186 billion cost.”
If a 30 percent tax rate is applied to deductions from taxpayers earning more than $100,000 in 2009, which totaled $636 billion, there would be $191 billion in extra revenue, according to Feldstein’s article.