Oops! That Tax Policy Center Analysis of the Romney Tax Plan Is Based on One Hugely Questionable Assumption
Here’s the killer paragraph from the recent Tax Policy Center study that supposedly shows Mitt Romney would raise taxes on middle-incomers:
The key intuition behind our central result is that, because the total value of the available tax expenditures (once tax expenditures for capital income are excluded) going to high-income taxpayers is smaller than the tax cuts that would accrue to high-income taxpayers, high-income taxpayers must necessarily face a lower net tax burden. As a result, maintaining revenue neutrality mathematically necessitates a shift in the tax burden of at least $86 billion away from high-income taxpayers onto lower- and middle-income taxpayers. This is true even under the assumption that the maximum amount of revenue possible is obtained from cutting tax expenditures for high-income households.
But since Romney has yet to detail exactly what tax breaks he would kill or trim — and for whom — the study made a bunch of guesses. And as my AEI colleage Matt Jensen highlights in a new blog post, some of those guesses were off target in a big way…