Princeton economist: Romney’s tax plan math adds up

Coming off a horrible debate performance last week, President Barack Obama’s campaign is stepping up its criticism of Mitt Romney by going after his tax plan. According to The Hill, Obama’s staff says that Romney’s tax plan doesn’t add up:

President Obama’s campaign Sunday sought to keep undercutting Mitt Romney’s tax proposal, as a campaign spokesperson insisted it was mathematically impossible.

Speaking to the press, spokeswoman Jen Psaki said that Romney’s plan to cut taxes across the board while not contributing to the deficit does not add up.

“And I was not a math major, I was an English major.  So just to be clear, this is something any American can do,” she said.

The nonpartisan Tax Policy Center has estimated that Romney’s tax cuts would cost nearly $5 trillion. But Romney maintains that the cost of those cuts can be covered by eliminating various tax credits, deductions and loopholes.

But Psaki argued that even if you give Romney the “absolute benefit of the doubt,” on what various deductions could be trimmed, his plan still comes up short by about a trillion dollars.

The Tax Policy Center’s estimate of Romney’s tax plan is inaccurate because they didn’t, by their own admission, score every aspect. Just last week, Stephanie Cutter, a spokesperson for the Obama campaign, was forced to back down from assertion that Romney’s plan would cost $5 trillion.

And contrary to what President Obama’s campaign is saying, Harvey Rosen, an economist at Princeton University, recently explained that the math behind Romney’s tax plan works, based on some assumptions, via John McCormack at The Weekly Standard:

As Princeton economics professor Harvey Rosen writes, Romney’s plan would neither require a net tax hike on the middle class nor a tax reduction for the rich under “plausible” growth assumptions.*

“[T]he TPC model assumes that regardless of the tax rate, people work the same amount, save the same amount, and invest the same amount,” writes Rosen. But growth is the whole point of Romney’s plan. “[A] proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on high-income individuals about the same,” Rosen writes. “That is, an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral.”

*What counts as plausible? Rosen notes that that’s in the eye of the beholder, but it wouldn’t be zero, as the Tax Policy Center assumes.

Rosen finds that Romney’s plan could work if tax reform causes the economy to grow 3 percentage points more over a given period of time than it would have grown without tax reform.

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