The Tax Policy Center, in the study released two weeks ago, said it could not find a way to take Romney’s major tax ideas and craft a revenue-neutral plan without shifting the tax burden away from the wealthy, even under the most progressive of assumptions.
Romney has proposed slashing all income tax rates by 20 percent across-the board and eliminating capital gains taxes for those making under $200,000 a year and the Alternative Minimum Tax. The presumptive GOP nominee would also keep the top rate for capital gains at 15 percent.
The former Massachusetts governor has said he would pay for those changes by eliminating tax credits and deductions currently in the code, and that his plan would not lead to the highest earners seeing a drop in their tax bill. But Romney has also not gone into much detail on what tax preferences he would target.
Obama’s campaign quickly started circulating the study’s conclusions, which also say that Romney would need to get rid of roughly 65 percent of the incentives in the tax code, and have also included the analysis in advertisements.
Romney’s camp immediately slammed the study when it was released, noting that one of its authors, Adam Looney, formerly worked in the Obama administration. (William Gale, one of Looney’s co-authors, served under President George H.W. Bush.)
Conservative allies of Romney’s, like The Wall Street Journal editorial page, have also questioned some of the study’s assumptions – particularly that Romney wouldn’t roll back preferences for interest on tax-exempt municipal bonds or life insurance. Targeting those preferences, the Journal said, could claw back much of the $86 billion the Tax Policy Center says would be shifted from the rich to the lower and middle classes.
In his interview with Fortune, Romney also questioned the study’s framework.
“They made various assumptions about what they thought I would do which are not in fact accurate,” Romney said. “They made an assumption that I would reduce the home mortgage-interest deduction. I will not do that for middle-income taxpayers, as I have already indicated.”
Romney added that the president’s fiscal commission laid out a path for bringing down rates and closing loopholes at the high end. Unlike the Simpson-Bowles commission, Romney has not proposed using tax reform to raise direct revenue for deficit reduction.
But Howard Gleckman, of the Tax Policy Center, who was not one of the study’s authors, told The Hill that something would have to give in Romney’s tax plan.
Gleckman said that many of the more costly tax breaks – like those for mortgage interest and healthcare – are widely used by the middle class, a response also used by some Democrats who have criticized Romney’s plan.
And, as Gleckman noted Wednesday, Simpson-Bowles also proposed taxing capital gains and dividends at the same top rate as ordinary income. Currently, the top rate for income is more than twice as high as the top rate for capital gains.
“You can’t do deficit neutral, not touch investment income, lower rates as dramatically as he does and not touch the middle class,” Gleckman said Wednesday. “You just can’t do all those things.”