Are we being scammed?

People need to consider carefully the following...

This to what Mitt Romney says on his web page (as of Oct 16, 2012): http://www.mittromney.com/issues/tax

Individual Taxes

• Make permanent, across-the-board 20 percent cut in marginal rates
• Maintain current tax rates on interest, dividends, and capital gains
• Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains
• Eliminate the Death Tax
• Repeal the Alternative Minimum Tax (AMT)

Corporate Taxes

• Cut the corporate rate to 25 percent
• Strengthen and make permanent the R&D tax credit
• Switch to a territorial tax system
• Repeal the corporate Alternative Minimum Tax (AMT)

This will provide big benefits especially to the very rich and big corporations.  http://www.alan.com/2012/07/19/how-romneys-tax-plan-hurts-the-poor-and-helps-the-rich/

The Romney plan would significantly exacerbate the already serious problem of income inequality in America, conferring extraordinarily large tax cuts on the wealthiest Americans while raising taxes on people making less than $30,000 a year. TPC [Tax Policy Center] estimates that people who make over $1 million a year would get an average tax cut of $250,000 in 2015 (increasing their after-tax income by an average of almost 12 percent), while people making between $40,000 and $50,000 would get an average tax cut of $512 (increasing their after-tax income by an average of 1.3 percent), and people making between $10,000 and $20,000 would pay an average $174 more in taxes (decreasing their after-tax income by an average of 1.1 percent).

However, the fact check organizations say that implementing the above changes to our taxes would result in a $5 trillion deficit over the next decade.

    http://www.politifact.com/truth-o-meter/statements/2012/oct/04/barack-obama/obama-says-romneys-plan-5-trillion-tax-cut/

    http://factcheck.org/2012/10/the-facts-according-to-obama-and-romney-ads/

To address the criticism that this will increase the national debt, Romney has started promising verbally that these tax cuts will be revenue-neutral (http://www.forbes.com/sites/beltway/2012/10/12/five-things-you-should-know-about-mitt-romneys-5-trillion-tax-cut/).   Here is what he said in an interview with Fortune magazine on August 6.  http://finance.fortune.cnn.com/2012/08/15/mitt-romney-interview/

I announced my tax plan that the key principles included the following. First, that high-income people would continue to pay the same share of the tax burden that they do today. And second, that there would be a reduction in taxes paid by middle-income taxpayers. 

[I will] work with Congress to identify which of the alternative methods we should apply to reduce deductions, benefits, and exemptions. 

First note that these "key principles" are not listed on his web site:  http://www.mittromney.com/issues/tax

Further he refuses to even specify any substantial deduction, benefit and exemption that he would seek to reduce. http://www.politifact.com/truth-o-meter/statements/2012/oct/04/barack-obama/obama-says-romneys-plan-5-trillion-tax-cut/

Romney has yet to specify what tax breaks he would change. The impact of changing deductions on the scale needed to offset the tax cuts would be great. The largest deductions include interest on home mortgages, state and local taxes and the tax free treatment of health benefits. These are real pocketbook issues for most households and tinkering with them could have significant effects on large sectors of the economy.

So what do the economists say about his plan?

The Tax Policy Center tried to make his 20% tax cut revenue neutral.  http://www.bloomberg.com/news/2012-08-02/romney-tax-plan-on-table-debt-collapses-table-.html

The analysts assumed that any cuts to deductions or loopholes would begin with top earners, and that no one earning less than $200,000 would have their deductions reduced until all those earning more than $200,000 had lost all of their deductions and tax preferences first. The numbers never worked out... ended the same way: with a tax increase on the middle class. The tax cuts Romney is offering to the rich are simply larger than the size of the (non-investment) deductions and loopholes that exist for the rich. That’s why it’s “mathematically impossible” for Romney’s plan to produce anything but a tax increase on the middle class.

 If Romney tries to pay for his tax cuts by reducing spending, the results, as the Tax Policy Center notes, would be even more regressive. Romney has promised to increase defense spending and hold benefits steady for the current generation of seniors. The only remaining big spending programs are those that help the poor; that’s where Romney’s cuts would have to be concentrated. Paying for tax cuts for the rich by curtailing programs for the poor is even more of a reverse-Robin Hood act than paying for tax cuts for the rich by cutting the tax expenditures (deductions and the like) of the middle class.

Besides the Tax Policy Center there have been a number of other studies some done by conservative economists and groups such as the Heritage Foundation.  http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/09/27/wonkblogs-comprehensive-guide-to-the-debate-over-romneys-tax-plan/

All of the above analyzes assume that Romney totally eliminates the charitable deduction, mortgage-interest deduction, all education tax breaks, all state and local tax deductions the employer-provided health care exemption, all Health Savings Account and medical expenses deductions, and more for people making over $200,000. Even if TPC is wrong, you’d probably have to limit them for people making under that amount too, so middle-class people pay the same amount when you take into account the rate cuts.
These are enormous changes. Eliminating the charitable deduction for the rich could effectively wipe out funding for thousands of charitable, artistic, and educational institutions. Eliminating the mortgage-interest deduction would upend the housing sector, reducing demand to buy dramatically and shifting the sector toward renting. Eliminating the employer health exemption could mark the beginning of the end of the employer-based health system as we know it.

Here is a professor in the economics department at Harvard University attempting to find feasibility in Romney's tax plan gets into eliminating deductions and exemptions for those in the middle class.  http://gregmankiw.blogspot.com/2012/09/a-reply-from-martin-feldstein.html

eliminating all deductions for taxpayers with AGI above $100,000
eliminating the exclusion of employer payments for health insurance for those with AGI over $100,000
eliminating the exclusion of municipal bond interest for taxpayers with AGI over $100,000

In addition to the potential deficit caused by his 20% tax cut, Romney is also planning on spending $2 trillion (over the next decade) on the military more than Obama's budget and above what the military has asked for.  http://www.politifact.com/truth-o-meter/statements/2012/oct/05/barack-obama/obama-says-romney-would-spend-2-trilllion-military/
Romney has not said how this additional military spending will be paid for other than in unspecified spending cuts.

The Center on Budget and Policy Priorities says: http://www.cbpp.org/cms/?fa=view&id=3658

Governor Mitt Romney’s proposals to cap total federal spending at 20%  of gross domestic product (GDP) and boost defense spending to 4%  of GDP would require very large cuts in other programs, both entitlements and discretionary programs.

For the most part, Governor Romney has not outlined cuts in specific programs.  But if policy­makers repealed health reform (the Affordable Care Act, or ACA) and exempted Social Security from cuts, as Romney has suggested, and cut Medicare, Medicaid, and all other entitlement and discretionary programs by the same percentage to meet Romney’s overall spending cap and defense spending target, then they would have to cut non-defense programs other than Social Security by 22% in 2016 and 34% in 2022.  If they exempted Medicare from cuts for this period, the cuts in other programs would have to be even more dramatic — 32% in 2016 and 53% in 2022.
If they applied these cuts proportionately, the cuts in programs such as veterans’ disability compensation, Supplemental Security Income (SSI) for poor elderly and disabled individuals, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), school lunches and other child nutrition programs, and unemployment compensation would cause the incomes of large numbers of households to fall below the poverty line.  Many who already are poor would become poorer.

The cuts in non­-defense discretionary programs — a spending category that covers a wide variety of public services such as elemen­tary and secondary education, law enforcement, veterans’ health care, environmen­tal protection, and biomedical research — would come on top of the substantial cuts in this part of the budget that are already in law, due to the discretionary funding caps in last year’s Budget Control Act.

Note that Romney and Ryan never promise that they will not reduce the benefits for the poor.   http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/22/the-real-romney-ryan-budgets-cuts-arent-to-medicare-theyre-to-programs-for-the-poor/

Ryan cuts nearly $1.4 trillion from Medicaid over the next 10 years. That’s a 34% cut to the program’s expected spending over the next decade.

Ryan’s budget cuts $134 billion from food stamps, which is enough to kick 8-10 million people off the program.

Ryan cuts $166 billion from the portion of the budget that houses our education, training, employment and social services funding.

Romney’s budget is much, much more aggressive than Ryan’s. Ryan’s got about $5.3 trillion in cuts. Romney’s looking for $7 trillion. To make Romney’s numbers add up, you have to assume that by the end of his presidency, Romney will have cut every federal program that’s not Medicare, Social Security or defense spending by 57%.

So for Romney to not increase the national debt by $7 trillion dollars ($5 trillion by his 20% tax cut and $2 trillion for additional military spending),  he would have to cut most popular deductions and exemptions to middle class as well as to the rich and make drastic cuts to federal programs that serve the poor and middle class.

Questions:

1. Why is this 20% tax cut necessary if it is going to be revenue-neutral?  If it is revenue-neutral - some will gain some will lose - but on average there is no benefit.
2. If this revenue-neutral 20% tax cut is going to eliminate popular middle class deductions - why do it?
3. Why spend an additional $2 trillion above what the military asks for especially if it means drastic cuts in federal programs benefiting the poor and middle class?

The answer?

First please note again that Romney never says anything on his web site about his tax cuts being revenue-neutral or that loop holes, exemptions and deductions must be eliminated.  That promise is only verbal.  Plus they are keeping it a secret what specifically they will eliminate.  Perhaps there is no list.  Have you ever heard of the saying "get it in writing"?

Romney with a Republican Congress will institute his tax cuts first. Then perhaps when they have time they will look into eliminating unspecified popular deductions and exemptions. Doubtful that it will really occur.  What Republican Congressman would vote to increase taxes (by eliminating deductions and exemptions) on businesses and on the rich?  Even if it does happen, it will not be good for the middle class.

Likewise, the military will get their additional funding up front. New ships, submarines and aircraft will be built (http://www.aviationweek.com/Article.aspx?id=/article-xml/asd_10_09_2012_p02-01-504216.xml).   Then Congress especially if it is Republican controlled will start cutting federal programs.   If they succeed that will not be good for the poor and middle classes.

If the $7 trillion is not fully balanced by elimination of deductions and exemptions and massive cuts in federal spending, then they will say what is a few more trillion?  Note that the biggest growth in debt came under Republican Presidents. http://www.businessinsider.com/who-increased-the-debt-2012-9

So why?  Because the rich will get big tax cuts.  Big companies will get billions of dollars from tax cut savings and increase military spending.

Recall that Romney is very rich and benefits from the low capital gains tax rate.  http://money.cnn.com/2012/08/16/news/economy/romney-taxes/index.html

Romney is in that group of people who really, really benefit from low tax rates on capital gains and dividends.
Romney's financial disclosures suggest his net worth is as high as $264 million, making him one of the wealthiest candidates in history to seek the U.S. presidency.

Obama proposes to raise capital gain tax from 15% to 20% which means that Romney would have to pay more taxes. http://www.foxbusiness.com/personal-finance/2012/08/14/obama-vs-romney-which-tax-plan-works-for/

It would also allow Romney to pay back his rich backers.  http://www.csmonitor.com/USA/DC-Decoder/2012/1004/Election-2012-top-seven-super-PACs/Restore-our-Future

The top 1% of donors (105 people) have contributed 58% of all super PAC funding, mainly directed to help conservatives

Romney is throwing candy at us - lower tax rates and bigger military - but is hiding how this might be paid for.   Either the national debt is increased by $7 trillion or many of us will to pay for this.  And he has made it clear that it will NOT be the rich that will face higher taxes; that leaves most of us with higher effective taxes, decreased benefits and a higher national debt to be paid off by our grandchildren.

Definition: scam - to swindle someone by means of a trick - deprive somebody of something by deceit

This may be the biggest scam on Americans in history - 7 trillion dollars!