Mitt Romney has promised to lower the tax rate by 20% and reduce exemptions so that his tax plan is revenue neutral. Those tax cuts would total $4.8 trillion over 10 years.
“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,” Romney said.
Romney has been vague about the exemptions that he will cut. Middle class taxpayers rely on many of these exemptions to make ends meet, such as those for home mortgages, education and children.
While not clear on which exemptions he will cut, Romney has suggested that there might be an exemption limit at $17,000. This implies that he will limit all exemptions to that number.
Making some of its own assumptions because of Romney’s vagueness, the Tax Policy Center determined that it would not be possible to make a $4.8 trillion tax cut and balance the revenue reduction by reducing exemptions. Using the $17,000 limit, Romney’s plan would only raise $1.7 trillion, leaving a $3.1 trillion deficit to make up. Even if all exemptions were removed, Romney’s plan would still only raise $2 trillion in revenue. That would still leave a revenue shortfall of $2.8 trillion or $280 billion a year. Such a drop in revenue would add that much more to the annual deficit, making a balanced budget even harder. It also would impose a huge tax burden on the middle class.
Romney has also said that economic growth and new taxpaying jobs will make up the difference. Even if every one of the 23 million unemployed were given $40,000-a-year jobs and paid taxes at a generous 20% rate, there still would not be enough money to balance the tax cuts. That would bring in only $184 billion. Romney’s plan would still add $100 billion every year to the deficit.
Add in that Romney plans to increase defense spending by $2 trillion over ten years, or $200 billion every year, and the current $1 trillion deficit would become $1.3 trillion.
Of course, Romney has also promised to balance the budget. That means cuts, massive, draconian-style cuts. Since defense spending, currently at $700 billion, cannot be cut since it is going to be increased, other parts of the budget must be cut more heavily. Interest on the debt, which costs $200 billion a year, also cannot be cut. That leaves $2.6 trillion left in the budget that must be slashed by half to create a balanced budget. Social Security and Medicare are nearly $1.6 trillion of that.
It just can’t be done unless the elderly, poor and disadvantaged are kicked into the street while slashing spending by at least half for transportation, parks, law enforcement, courts, health and other essential programs.
Romney’s plan doesn’t add up, and he must know that. Either he is lying to the American public or he isn’t as sharp with dollars and cents as he claims to be. Take your pick, but neither choice is comforting for the man who may become the next President of the United States.