Comparing Obama and Romney's Tax and Budget Plans in One Handy Chart

ATR ^ | 2012-10-19 | Rhett Brooks

[92nina]

A lot of discussion has been made on the specifics of President Barack Obama and Governor Mitt Romney’s tax and budget plans. Based on statements made by both presidential candidates and CBO projections, it can be concluded that there is a drastic difference between their plans.

Our friends at the Tax Foundation have constructed a fun and convenient chart comparing the topline tax and budget positions of President Obama and Governor Romney:

[92nina]

Chart shows a drastic difference between candidates' plans.

[DManA]

I don’t see where he’s going to cut spending in any meaniful way. So best I can fugure Romney believes tinkering with tax rates will cause such an economic boom that treasure will collect $1trillion/year more.

Ok.

[jessduntno]

Do you have a chart that shows the tax bite on a married couple filing jointly that makes $150-250K a year? Small business owner territory?

[DManA]

If I understand him correctly there’s no change. Rates go down but deductions disappear resulting in no net dollar change.

[jessduntno]

Seeing that little AMT time bomb go away would be nice.

[oldbrowser]

So best I can figure Romney believes tinkering with tax rates will cause such an economic boom that treasure will collect $1trillion/year more.

This has been said over and over again so you must be ignoring it. The tax plan is only a part of the plan.

the rest of the plan involves reversing the intrusive regulations that are hurting the economy such as Dodd Frank and ObamaCare.

Another major factor will be getting the agencies such as EPA, NLRB, IRS, and just about any and every other agency to end it's war on business. There is a difference between regulating and crippling

And finally, businesses need a stable government with comprehensible polices in order to be able to plan ahead and maximize their effort.

When these things are in place the economy and the country will explode in an orgy of productivity and creativeness that will shock the world.

[DManA]

These positive changes will result in good growth, in two years. In them mean time we continue to rack up $trillion+ deficits.

Plus there is the certainty that growth will all be eaten up by the starving cows of SSI, Medicare, Medicaid.

Maybe mere survival is the best we can expect at this point.

[remember]

I don’t see where he’s going to cut spending in any meaniful way. So best I can fugure Romney believes tinkering with tax rates will cause such an economic boom that treasure will collect $1trillion/year more. True. As with many highly questionable charts, this one gives very broad sources: "Candidates statements, CBO". They should add the line "good luck on tracking down the numbers!" Of course, this is likely as intended. Giving poor sources make it much less likely that any pesky "wonks" will be able to track down and verify the numbers or question their interpretation.

Following is a fully sourced table that looks at Romney's tax cut using 2009 IRS tax data:

         Projected Revenue Gain/Loss from Romney Tax Plan
                      (billions of dollars)

                               2009 IRS Data         Feldstein
                          ======================= ===============
Adjusted Gross Income -->     All   100K+   200K+     All   100K+
========================= ======= ======= ======= ======= =======
Income tax before credits     976     682     449     953
Dividends & capital gains      49*                     49*
------------------------- ------- ------- ------- -------
Tax affected by rate cut      927                     904
Revenue loss of 20% cut       185                     181
Alternative minimum tax        23                      23
Investing tax cut              15*                     15*
------------------------- ------- ------- ------- -------
Static revenue loss           223                     219
Dynamic revenue loss          190*                    186*
========================= ======= ======= ======= ======= =======
Home mortgage interest        421     199      67
State and local taxes         252     184     113
Real estate taxes             168      88      36
Contributions deduction       158      99      59
Other itemized deductions     206      67      30
------------------------- ------- ------- -------
Total itemized deductions   1,204     637     305            636
Revenue gain at 30%                   191      91            191
Revenue gain at 25%|27%               159      82            159
=================================================================
Note: following are estimates of revenue loss not included above:
-----------------------------------------------------------------
Estate tax elimination         21*
Phase in of deduction loss     15*
=================================================================
* estimated by Feldstein (else 2009 IRS data)

Sources: 2009 IRS Tax Data, Table 1.4, Sources of Income, Adjustments, and Tax Items
         2009 IRS Tax Data, Table 2.1, Sources of Income, Adjustments, Itemized Deductions
         Martin Feldstein's Wall Street Journal article, August 28, 2012
         Martin Feldstein's blog post, September 02, 2012

You can find an analysis of the numbers at this link. As the table and analysis show, it does not appear to be mathematically possible, much less politically possible, to pay for the Romney tax cuts by cutting deductions without raising taxes on the middle-class, something that Romney has pledged not to do.

To be fair, one possible explanation is the item in the ATR chart says states that the Romney plan "eliminates most [tax expenditures], except middle-class preferences for mortgage, health, retirement, and charity". If the Romney plan were to eliminate popular credits like the child tax credit and the personal exemption, perhaps the numbers could work. Of course, this would be politically impossible. That's another reason for demanding good sources. It would clarify what the ATR chart is including in this item.