All of the pundits I have read have assumed the Mitt tax plan will give massive tax cuts to the wealthy and then make up for the loss of revenue by doing some combination of:
1. Cutting government programs for the poor and middle class
2. Increasing taxes on the non-wealthy
3. Increasing the deficit
On 9/24 at a debate with an economic adviser to Barack Obama, an informal adviser to Mitt Romney said that Romney wouldn't raise taxes on low-income people or on the middle class. For the rich:
If you think the base-broadeners don’t add up, if you think he can’t get to 28 percent, then the right thing that would happen, as you know, if you’re going to have a revenue-neutral reform, is that they would have a different change in rates.
The advisor Kevin Hassett said that Romney would reduce the overall tax rate for the rich so that the tax revenue reduction from the rate change would equal the tax revenue increase from cutting tax expenditures for the rich. So overall, the rich would pay the same amount of tax.
With that, Romney's tax plan is reduced to nonsense that won't pass Congress.
All tax expenditures all have major lobbying groups that support them. If Mitt is going to propose ending the deduction of mortgage interest for the rich, then home builders, real estate agents, mortgage companies are all going to go nuts. If Mitt is going to propose the ending of deduction of charitable contributions for the rich, charities are going to go nuts. Etc, etc, etc. Supporters of each of the tax expenditures would demand that some other tax expenditure be cut, but not their own.
So, who would be for Mitt's new plan? Probably no one. The rich have done their tax planning using the current system and won't be thrilled to see those plans upended.
The big lesson here is that Mitt has to make someone unhappy with his tax plan and he refuses to say who. If no one is unhappy, then no one will be happy.
