Economists battle over feasibility of Mitt Romney’s tax plan

FILE – In this Aug. 25, 2012 file photo, Republican presidential candidate, former Massachusetts Gov. Mitt Romney and his vice presidential running mate Rep. Paul Ryan, R-Wis., arrive for a campaign rally in Powell, Ohio. They’re the political world’s newest odd couple: Mitt Romney and Paul Ryan are bound by substance, but dramatically different in style. The running mates share a love of policy, and a fascination with the world’s economy and America’s place in it. But where Romney is buttoned-up and reserved on the campaign trail, Ryan is relaxed and exudes a natural enthusiasm. (AP Photo/Evan Vucci, File)

SALT LAKE CITY — Economists are battling over whether Mitt Romney’s tax plan is actually possible after a recent Wall Street Journal column written by Martin Feldstein, a professor of economics at Harvard and the presidential candidate’s economic adviser.

Feldstein refuted the Tax Policy Center’s study, which claimed that Romney’s plan is “mathematically impossible.” The study also claimed the plan would cause a $181 billion revenue loss if changes didn’t spur economic growth.

If a 30 percent tax rate were 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.

The Tax Policy Center responded to Feldstein’s article in a recent blog post, claiming the economist confirmed the organization’s findings rather than refuting them.

Eliminating itemized deductions for taxpayers earning between $100,000 and $200,000 “would raise more in taxes from people in this group than they would save from the rate reductions and other specified features of Governor Romney’s plan,” the organization states in its post.

“While his results confirm our earlier finding, Feldstein employs several questionable assumptions that understate the revenue loss of Governor Romney’s tax cuts and overstate the revenue gains from reducing tax breaks and deductions,” the Tax Policy said.

Feldstein lashed back at the Tax Policy Center’s rebuttal in a post on his colleague Greg Mankiw’s blog.

The economist acknowledged objections critics have raised, like the 30 percent marginal tax rate being too high.

“While I still believe the assumptions that I used in my analysis, I can modify them as suggested by the critics and still support my original conclusion by broadening the tax base in ways suggested but not developed in my WSJ piece,” Feldstein said in his response.

Other economists, like U.C. Berkeley’s J. Bradford Delong, have also chimed in on the debate.

“If the maximum marginal tax rate is 28 percent, you cannot cut $1 of itemized deductions and increase revenue by 30 cents,” Bradford said on his blog. “It is not possible. The assumption that you can is unbelievable. Nobody should believe it.”

EMAIL: jferguson@desnews.com
TWITTER: @joeyferguson

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3 comments

  1. E B

    I recently read a lengthy article at National Review from a supply-side economist explaining why the Ivy League economists are often wrong, and why the Bain supply-side economics model works so well. It’s well worth reading. I’d link if Deseret News allowed it.

  2. There you go again

    It’s not a lie if you believe it.
    (George Costanza)
    The ryan/romney campaign spokespersons have stated they are not going to let their campaign be dictated by people who don’t agree with the campaign.

  3. Kent Francis

    If they want to solve the problem, let EVERYONE pay taxes as a percentage of what is their income (or a consumption tax) and then require a balanced budget. Why should whole groups of our society not pay taxes and be on the public dole? Congress should get no more benefits than the rest of us and should be held to a high standard before handing out our money.

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