Who does Mitt Romney consider rich? It's not an existential question but a mathematical one, and the answer could shed light on one of the big mysteries surrounding Romney's tax plan.
The Republican presidential nominee has been reluctant to provide details about how he'll achieve his campaign promise to cut individual income tax rates by 20 percent and eliminate the Alternative Minimum Tax and the estate tax -- all without adding a dime to the federal deficit.
As Bloomberg View editors have written, such a plan is unrealistic without more revenue, so Romney will undoubtedly have to increase the tax burden on middle- and upper-income earners.
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Martin Feldstein, a Romney campaign adviser, essentially confirmed this last week, writing in the Wall Street Journal that Romney would limit or eliminate tax breaks for "high-income taxpayers," who he defined as taxpayers with adjusted gross incomes of $100,000 or more.
Now, $100,000 may seem like a lot of change, especially given the median income of $75,648 for a family of four. But it's not what's typically considered "high-income," a term generally reserved for taxpayers making $200,000 or more. (Note that President Barack Obama has pledged not to raise taxes on families making less than $250,000.)
By broadening the definition of "high income" to $100,000, Romney can generate revenue without enacting an overt tax increase. How? By scaling back or eliminating popular tax breaks (like the mortgage interest deduction) which cost the U.S. about $1 trillion per year and overwhelmingly benefit those earning more than $100,000. In 2009, taxpayers earning between $100,000 and $200,000 claimed more than half of these itemized deductions.
Without going further down the income ladder and roping in more taxpayers, Romney runs into a math problem. As the Tax Policy Center has noted, Romney's proposal to cut tax rates across the board by 20 percent would reduce revenues by $251 billion. But there's only about $165 billion of available tax expenditures for those with incomes above $200,000. To remain "revenue neutral," Romney would have to plug that $86 billion hole -- a task made easier by taking away tax breaks for a broader share of taxpayers.
It isn't clear what a President Romney would do in terms of limiting these tax breaks. It's worth noting that Romney's running-mate, Paul Ryan, has advocated limiting tax expenditures and in April told Bloomberg View editors that -- in exchange for lower rates -- "more of your income should be subject to taxation if you're in the higher tax brackets."
With Election Day just two months away, Romney should outline exactly who he considers to be in the "higher tax brackets" so voters know whose tax burden will go up under his plan. To get the ball rolling, let's make one of the first questions at the upcoming presidential debates: "Who do you consider rich?"
(Deborah Solomon is a member of the Bloomberg View editorial board. Follow her on Twitter.)
Read more breaking commentary from Bloomberg View at the Ticker.
Here are some of the GOP platform's faultiest claims:
On The Stimulus
The GOP platform claims that "the waste of billions in 'stimulus' funds'" had "no payoff in jobs." In fact, <a href="http://takingnote.blogs.nytimes.com/2012/06/08/c-b-o-s-take-on-the-stimulus/" target="_hplink">the 2009 stimulus saved or created more than 3 million jobs</a>, according to the nonpartisan Congressional Budget Office.
On Federal Regulations
The GOP platform claims that federal regulations cost $1.75 trillion per year. But researchers have <a href="http://www.sei-international.org/mediamanager/documents/Publications/Climate/Heinzerling_Ackerman_MJEAL_2012.pdf" target="_hplink"> largely discredited</a> this figure.
On Health Care Reform
The GOP platform claims that the Affordable Care Act is "budget-busting." However, the Obama administration's <a href="http://www.huffingtonpost.com/2012/08/20/paul-krugman-niall-ferguson-newsweek_n_1810136.html" target="_hplink">health care reform law actually reduces the deficit</a>, according to the nonpartisan Congressional Budget Office.
The GOP platform claims that without reforms, Medicare and Medicaid "are headed for bankruptcy." Though Medicare has <a href="http://www.cbpp.org/cms/index.cfm?fa=view&id=3532" target="_hplink">long-term financial problems</a>, it is not on the brink of bankruptcy, according to the Center for Budget and Policy Priorities.
On Welfare Reform
The GOP platform claims that Obama's decision to allow waivers for welfare reform's work requirements was "in other words, to administratively repeal the most successful anti-poverty policy in memory." But the work requirements still are in place, according to <a href="http://www.theatlantic.com/politics/archive/2012/08/what-obama-really-did-to-welfare-reform/260931/" target="_hplink">several</a> <a href="http://abcnews.go.com/blogs/politics/2012/08/fact-check-does-obama-want-to-gut-welfare-reform/" target="_hplink">media outlets</a> and Dean Baker, co-director of the Center for Economic and Policy Research. Welfare reform was not so successful either; as Baker notes, <a href="http://www.huffingtonpost.com/huff-wires/20120723/us-poverty-in-america/" target="_hplink">the poverty rate</a> is on track to reach its highest level since the mid-1960s.
The GOP platform claims that "the inflation tax is regressive." But inflation, which is at historically low levels, would help low-income and middle-income people the most by <a href="http://www.bostonglobe.com/ideas/2011/09/12/the-word/8YP9RCx7i5amoAwNCr4TcL/story.html" target="_hplink">stimulating job growth</a> and making it easier for debtors to pay off their debt, according to Dean Baker, co-director of the Center for Economic and Policy Research.
On Corporate Tax Breaks
The GOP's platform claims that reducing the corporate tax rate would "spur job creation here at home." Last time the U.S. <a href="http://www.huffingtonpost.com/2011/06/24/corporate-tax-holiday-jobs-investment_n_883827.html" target="_hplink">did that, in 2004</a>, corporations laid off thousands of U.S. workers, according to the Center on Budget and Policy Priorities.
On The Housing Bubble
The GOP platform claims that "Fannie Mae and Freddie Mac were a primary cause of the housing crisis because their implicit government guarantee allowed them to avoid market discipline and make risky investments." On the contrary, <a href="http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-discovers-that-it-was-all-fannie-maes-fault" target="_hplink">the riskiest mortgages were securitized</a> by big banks, not Fannie Mae and Freddie Mac, according to Dean Baker, co-director of the Center for Economic and Policy Research.
On Health Care Reform
The GOP platform claims that voucherizing Medicare is "the only way to limit costs." However, <a href="http://www.huffingtonpost.com/2012/06/27/supreme-court-health-care-decision_n_1630596.html" target="_hplink">Obamacare already reduces Medicare spending</a> without resorting to what former federal budget director <a href="http://www.huffingtonpost.com/2012/08/20/peter-orszag-paul-ryan_n_1812046.html" target="_hplink">Peter Orszag calls "the health care competition tooth fairy."</a>
On Home Sales
The GOP platform claims that "home sales remain weak." But existing home sales have risen more than 25 percent since the mid-1990s, as should be expected with population growth, according to Dean Baker, co-director of the Center for Economic and Policy Research. "Investment in housing is down because the building boom of the bubble years gave us a record level of housing vacancies," Baker notes.
On Social Security
The GOP platform claims that "younger Americans have lost all faith in the Social Security system." However, <a href="http://www.gallup.com/poll/1693/social-security.aspx" target="_hplink">only 21 percent of non-retirees</a> say they do not expect Social Security to be a source of income when they retire, according to Gallup.
The GOP platform claims that "homeownership...helps Americans create wealth." However, <a href="https://twitter.com/AJInsight/status/235488109419196416" target="_hplink">the returns on U.S. housing investment have been nearly flat</a> over the past century when adjusted for inflation, according to Yale professor and housing expert Robert Shiller.
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