Presidential debate 101: Does Romney have a $5 trillion tax cut, or not?
In terms of numerical assertions, Wednesday鈥檚 presidential debate at times seemed like a playground fight instead of a substantive encounter. President Obama and GOP nominee Mitt Romney threw figures at each other as if they were snowballs.
鈥淵ou鈥檝e got a $5 trillion tax 肠耻迟!鈥�
鈥淒o not! You鈥檙e the one with a $716 billion Medicare 肠耻迟!鈥�
鈥淣ot true!鈥�
"Yes true!鈥�
And so on. Eventually the school bell rang and they had to go in. Or moderator Jim Lehrer said it was over and they shook hands. One or the other.
That can鈥檛 be edifying for viewers who don鈥檛 keep Congressional Budget Office reports on their bedside tables. So we鈥檒l try to explain in a basic way the facts as we understand them behind some of the candidates' primary substantive disagreements.
We鈥檒l start with the $5 trillion tax cut mystery. At the beginning of the debate, Mr. Obama charged that Mr. Romney鈥檚 economic plan calls for a tax reduction of that dollar figure, and that one of the 鈥渃entral questions of the campaign鈥� is how the former Massachusetts governor will pull that off without shifting more of the US tax burden onto the middle class.
Romney said flatly 鈥淚 don鈥檛 have a $5 trillion tax cut.鈥� He said the US should provide tax relief to the middle class, without reducing the share of taxes paid by high-income people.
What鈥檚 the story here?
It is true that a central facet of Mitt Romney鈥檚 economic plan is a 20 percent across-the-board reduction in marginal tax rates, plus elimination of the estate tax and the alternative minimum tax (AMT). Do the math on how much money the federal government would forgo as a result of this, and it鈥檚 about $456 billion a year. Over 10 years, that rounds up to $5 trillion. That's the calculus behind the "$5 trillion tax cut" figure that Obama cites.
However, that鈥檚 only part of the tax plan. Romney has said he would make his overall tax changes revenue-neutral. He鈥檇 hack out deductions, exemptions, and other exclusions to broaden the tax base, for one thing. For another, he says that lowering marginal rates would increase economic activity, and hence tax revenue. These changes would counterbalance any revenue lost from rate reductions, according to Romney.
Those are ambitious goals, and Romney hasn鈥檛 provided more than hints about which deductions and exemptions he鈥檇 try to get rid of. Without such specifics to go on, the nonpartisan Tax Policy Center ran the numbers on Romney鈥檚 plan, and decided they just don鈥檛 add up. A revenue-neutral tax reform that includes 20 percent marginal cuts, no estate tax or AMT, gets rid of a substantial portion of deductions, and keeps existing tax breaks for investments (as Romney has said he would) ends up shifting about $86 billion in annual tax costs onto the middle class, it reported.
No surprise, the Romney camp has hotly contested the results of this study, saying it鈥檚 flawed. Romney has started to speculate on possible additional tax details, such as a cap on the deductions that wealthy taxpayers can claim. Faced with a tax plan that shifted the burden to the middle class, Romney could change course 鈥� reducing the size of the marginal reductions, say.
But as long as the Romney campaign doesn鈥檛 provide concrete tax specifics, the Obama camp will be happy to provide them for him, framing the plan in the worst possible light. For a voter, the most important question may not be whether this is fair. It might be this: Given the circumstances described, what do they think President Romney would actually do if he had to juggle things to make his numbers work?
