During the presidential campaign, CBS News reported that it did not know if the numbers on the Romney tax plan would work out. In other words, over 10 years, could the $5 to $6 trillion loss in revenue be made revenue neutral? I never did hear if CBS News made an effort to crunch the numbers. Their researchers could have readily found two sources available a full month or more before the election to show that the numbers didn’t add up.
The Tax Policy Center found that if one eliminated all the tax preferences for households with taxable income of $250,000 or more, the revenue offset over 10 years would be $1.7 trillion. The elimination of corporate tax breaks sufficient to offset the reduction in the corporate tax rate from 35 to 25 percent would have reduced the revenue loss by another $1.1 trillion over 10 years. Thus, the revenue loss from a decade of Romney tax cuts would be offset by a total of $2.8 trillion, well under the $5 to $6 trillion loss in revenue.
If Mitt Romney was counting on a promised creation of 12 million jobs to offset the revenue loss, he didn’t have any idea of how unrealistic his assumption was. If each job paid $40,000 and each job holder paid 20 percent in federal income tax, it would produce only $96 billion in 2016. The ten-year revenue gain would be under a trillion dollars.
In order to fill a $5 to $6 trillion revenue gap at a 25 percent tax rate for each of 12 million new jobs, the average new job would need to pay a mere $433,333.
Mitt Romney also set a 2016 target of reducing federal spending to 20 percent of GDP by 2016. One estimate is that this would have required a 40 percent cut in outlays on such things as Medicaid, education and transportation.
CBS News nor any other major media outlet paid much attention to Paul Ryan’s tax and budgetary plan, a plan that Mitt Romney immediately called “fabulous.” The Ryan plan featured only two tax rates of 10 and 25 percent and the elimination of all taxes on divdends, capital gains and inheritances. One measure of his plan is that it would shrink non-defense discretionary spending to 3 percent of GDP by the year 2030 (about a quarter of the present level).