By this point we have all heard it. Romney dropped a major rhetorical flip flop at the debate the other night when he claimed, with a straight face that he did not have a plan to cut taxes by $5 Trillion Dollars, and he didn't know where President Obama was getting those numbers. In the following days we have seen pundits, even the normally great Ezra Klein on MSNBC twisting themselves into pretzels trying to explain it. Basically the argument goes a little something like this...
Since Obama's criticism is the cost of the tax cut, and since Romney "plans" to "pay" for it (so he says) it would be revenue neutral because the bottom line on the Governments balance sheet would stay the same. Thus President Obama was wrong to call it a $5 Trillion Dollar Tax Cut.
This immediately begs the question I have asked a few times now. If cutting the income tax rate by 20% doesn't count as cutting taxes because it's supposedly "paid for" does raising the income tax rate not count as raising taxes so long as you spend all the extra money the Government would otherwise take in? The bottom line would remain the same so it's revenue neutral, right?
Romney's argument requires a redefinition of what constitutes a tax cut. In the real world lowering the rate at which taxes are levied by itself constitutes a tax cut, despite whatever else happens in other parts of the budget. When you look up the rates with the IRS, under Romney's plan they will be lower than they currently are. Tax Cut. When historians look back at the tax rates under the (god forbid) Romney Administration they would say tax rates went down by 20%.
Tax Cut. Tax Cut. Tax Cut.
If you want to talk about "Effective Tax Rates" well that's a whole other ball game, and if Romney wants to say his plan is not a "revenue cut," then that's fine and dandy too, so long as he can provide specifics about where he plans to make up the lost revenue. But Romney didn't say he doesn't "cut revenues" or that he won't cut your "effective tax rate" he specifically said he hasn't offer a "tax cut" and to believe that to be true you have to believe a few puzzling things.
First, you have to believe that your effective tax rate is for all intents and purposes the only thing that matters. But not only is the effective tax rate going to vary wildly from individual to individual but this change of frame goes against our nations entire political history. For example if the Federal Government cuts taxes as Bush did, and the States respond by compensating for lost funds with increased taxes (as many states did under Bush) your total effective tax rate was probably pretty close to the same, and in some cases higher.
Yet Republican's never once claimed Bush raised taxes. Nor do they claim he never cut taxes. They are to this day referred to as "The Bush Tax Cuts."
Second, you have to believe that only tax cuts which aren't paid for count as true tax cuts. This is an incredibly dangerous new definition that the media cannot let Romney get away with. If this becomes the new normal you can expect every future Republican who proposes a Tax Cut to never once offer to pay for it, because then it wouldn't be a real Tax Cut.
Third, you have to accept this idea that cutting deductions is a tax hike. While that may be the effect it has on how much people pay in taxes. The fact of the matter is the actual tax rate doesn't increase when you cut deductions. It's simply a deduction reduction. Deductions reduce how much you would otherwise owe. Reducing deductions means you will pay closer to what you were supposed to be paying all along.
The actual tax rate doesn't go up, it stays the same.
For his part the President has been pretty smart about how he words this when he attacks Romney's deduction reductions saying they will result in the average middle class family paying roughly $3,000 more every year. If you believe the Center for American Progress, which I do.
But this is where we hit an inconvenient bump in the Romney logic. Claiming anytime the Government takes more money from you, your taxes have gone up should work both ways. In other words the Government giving less of your money back should also count as a Tax Increase. Yet somehow this is totally fine.
It's like when you pay extra for an unlimited data plan on your cellphone and then ATT&T decides that while it is "unlimited" they're gonna go ahead and cap ya anyway. Sure you can still use your unlimited connection if you go passed the cap, but you might as well dig out your old dial up modem and put it in your PC because that old piece of crap is going to be about 5X faster than your newly capped data rate. And no they're not lowering the price to accommodate this new policy.
My personal issues with ATT&T aside, I do in fact have an actual point.
You see, using Romney's logic makes getting less than what you've paid for "effectively" a price hike. If you're paying $20 dollars and you only get $15 dollars worth of gas, that means Gas Prices went up. Which coincidentally makes cutting earned benefits that people have already paid for "effectively" a tax increase. Because you see we paid for X amount worth of services, and now we're only getting Y amount for our money. Meaning the Government took more of our money than it is giving us back.
But as much as I love dismantling the half baked logic used by Conservatives to have their cake, your cake, your grandmothers cake, create cake derivatives, begin selling cake default swaps on the stock exchange, oh and eat it too; let's get back to Romney's Non-Tax Cut argument.
This whole exchange with Romney was of course one of the most frustrating parts of the debate. Romney very badly wanted Obama to ask WHY anyone would bother cutting taxes if you're just going to turn right back around and raise other "taxes" by eliminating deductions, thus balancing the whole mess out?
Well Obama didn't take the bait, but Mitt had already memorized the answer so he went ahead and asked it himself. Rumsfeld style.
His answer to his own question, which he posed to himself, was that if you bring down the tax rates, business owners who pay the individual rate (because they are the sole proprietor of the business) would benefit from paying a lower tax rate, magically helping the economy while the difference would be "made up" elsewhere.
It was frustrating because Obama should have smacked it down hard.
Not only is that business owner likely to also have a mortgage, and other currently deductible expenses for which he would also pay more, effectively neutralizing his new found tax cut. But this whole plan is based on the idea that we should burden employees for the benefit of their boss.
That's just bad politics.
Obvious Trickle Down/"Job Creator" Economics aside when did this become a sensible political opinion to hold? Did I fall asleep and suddenly there are far more small business owners than there are employees? Does Mitt Romney think he can win by appealing to the manager class, while telling the grunts to pay up? He does know that employes outnumber bosses, right? By like a lot. For every one business owner there are usually multiple employees. So from a strictly numbers perspective this is a bad idea.
Maybe he thinks Bosses get extra votes. Maybe he think his pal Bob Murray is the standard and all bosses force their employees to support Mitt Romney. In any case Romney seems to think that making employees pay the price of their bosses tax cut is a great idea. However I can't help but ask why Mitt didn't just propose a new tax deduction for sole proprietors of actual small businesses? If he's so concerned about giving them a fair shake that seems a much more reasonable solution than cutting rates across the board.
The answer is two-fold.
First he resents poor and middle class people. He doesn't think they deserve deductions and exemptions so of course he going to target those things. Us forty-seven percenters are "takers" and we should be punished for not being more successful. It's about Mitt getting to the top and pulling the ladder up on everyone else.
Second, it's not about small business owners at all. Mitt wants to help businessmen like himself. Mitt was the sole proprietor of Bain Capital and as such most likely paid the individual tax rate on his income. We of course don't know this for certain because he has refused to release his tax returns. But it's pretty safe to say he wants Billionaire CEO's to be able to pay themselves a real salary, typically $1 million dollars a year or more, without having to pay the 35% income tax rate on that salary.
A lot of CEO's officially get paid a dollar and the rest of their billions come in the form of stocks options, bonuses and other means of compensation that are taxed at a much lower rate. They do this to avoid paying income tax on an actual salary. My guess is these CEO's feel entitled to real salaries, but they don't want to pay the much higher income tax rate.
Funny thing about those super rich CEO's; unlike their small business counterparts they generally don't have mortgages to deduct, they buy property outright. They don't qualify for the earned income tax credit or the child tax credit, they don't have to worry about refunds for college tuition or any of the other things the Center for American Progress has speculated Romney will cut in order to pay for this non-tax cut.
In short they get the tax cut without being effected by the cut deductions and exemptions. For Romney the benefits to the Top 1% far outweigh any downside felt by the rest of us. It really is Bush on steroids. Dubya at least had the decency to keep the benefits for the rest of us mostly intact as he handed out favors to his super rich friends. Romney not only wants to cut his own taxes, but he wants to pull the rug up from under everybody below him. And he expects you to cheer him on because it's "revenue neutral."
You can call it disgusting, disturbing, dishonest, disastrous and virtually any other word you can think of that starts with "dis" Mitt's fine with all that.
Just so long as we don't call it a Tax Cut.