There are only two possible outcomes of the candidate's proposal to cut taxes by 20 percent: Either the deficit explodes or the rich pay much more.
Poor Mitt Romney. First it turned out that he couldn't even put away Rick Santorum -- Rick Santorum! -- by late February. Now it turns out he can't do arithmetic.
Romney has failed to wrap up the nomination, despite an overwhelming financial advantage and the backing of the GOP establishment, because he can't show that he is "severely conservative" enough to satisfy the Republican base. This forced him to veer to the right on taxes to keep up with the rest of the field, which has been competing to put forward the looniest tax plan. Before yesterday's release of his new tax plan, Romney actually proposed keeping income tax rates at George W. Bush levels, as shown by a page on his website that hadn't been updated as of last night:
Most likely Romney didn't want to chase Cain, Perry, and Gingrich to the right on taxes because it would make him vulnerable in the general election. Now, however, he has to show how much money he can shower on the rich just to win the nomination.
According to yesterday's bullet points, Romney wants to cut all tax rates by 20 percent, meaning that the top income tax rate, which is currently scheduled to rise from 35 percent (George W. Bush, 2001) to 39.6 percent (Bill Clinton, 1993), would instead fall to 28 percent.
There are several things about this plan that are either loony or deeply misleading. One is the claim that it would "address the debt crisis" because it will be paid for by $500 billion in spending cuts by 2016. But the only proposals mentioned would (a) repeal the Affordable Care Act (increasing deficits, since the ACA has been scored as deficit-reducing); (b) convert Medicaid to a block grant (no deficit impact); (c) increase government efficiency (yawn); and (d) cut Social Security and Medicare benefits for "younger generations" (no impact until well after 2016). In other words, it's a complete fantasy.
But I'm going to focus on Romney's bizarre claim to be tough on the 1%: "for middle income families, the deductibility of home mortgage interest and charitable contributions, those things will continue, but for high income folks, we are going to cut back on that so we make sure the top 1% keeps paying, paying the current share they're paying or more."
In theory, one could maintain the effective tax rate on the super-rich while lowering rates by reducing their deductions and other tax expenditures. But do the numbers add up?
Under current law, which includes the Bush tax cuts, the top 1% in 2011 paid an effective income tax rate of 20.3 percent of their total cash income. Repealing the alternative minimum tax (a Romney proposal) would reduce their effective rate by at least 0.4 percentage points.* A 20 percent cut in income tax rates would knock another 4 percentage points off their tax rate. Repealing the estate tax is worth another 0.3 percentage points of cash income, for a total tax cut of 4.7 percentage points. That works out to a 6.8 percent increase in after-tax income.**