In an article published today, Bloomberg echoes a concern we previously voiced here, questioning where Mitt Romney intends to conjure enough offsets to the $5 trillion in lost revenue resulting from his proposed tax rate cuts to keep the proposal revenue neutral. Publicly, Romney has been adamant that his rate cuts would not increase the deficit, and thus there must be $5 trillion in additional tax revenue to be had in cutting certain tax breaks.
The problem, as it has been pointed out time and time again, is that there simply isn’t $5 trillion in tax revenue to be had in broadening the tax base. At least not without both:
1) eliminating the rather popular tax-exempt health care, charitable contributions, state and local taxes and mortgage interest, and
2) increasing the tax liability of the middle and lower class, which Romney has stated he would like to avoid.
We’ve always found this to be the biggest shortcoming in Romney’s proposal. While a 28% maximum rate sounds appetizing — as do 0% capital gains, dividends, and interest rates for those earning less than $200,000 — with a steadily mounting deficit, how can Romney propose to both cut tax rates and decrease the deficit if there isn’t enough base broadening to be done?