The fallout from Paul Ryan’s hand waving on specifics for the tax package he and Mitt Romney are running on continues. A woman at a town hall event in Iowa pressed him for specifics, and Ryan again basically demurred. He said how hard it would be to deliver the math in the confines of a broadcast television format, then spent 5 minutes or so offering the woman no specifics on what precise tax expenditures he and Romney would be willing to eliminate to reach the goal of reducing tax rates by 20% while not lowering the tax burden on the rich and not collecting any less in total revenue.
Ryan had a much longer interview with Bloomberg TV today, and in that longer format, he got a bit more specific, but didn’t identify which tax expenditures would get bulldozed to pay for the cut in rates. He just asserted that the tax expenditures eliminated would fall mostly on the rich. However, when asked whether one specific loophole focused entirely on the rich would go – that would be the carried interest loophole, which allows fund managers to pretend that their income is actually a capital gain, taking advantage of the 15% tax rate rather than 35% – Ryan wouldn’t say.
Finally, Ryan defended the lack of specifics by saying “You don’t say to Congress, to Democrats you want to work with, take it or leave it, it’s all my way or the highway,” while still demanding a 20% across-the-board cut in individual tax rates.
There’s a very good reason that Ryan won’t get specific on his ticket’s tax plan. It’s not just because identifying the elimination of tax breaks would be unpopular. It’s because it’s mathematically impossible.
You cannot lower tax rates as much as Mr. Romney and Mr. Ryan propose to do and keep all the existing tax expenditures for middle class Americans and still end up with the same total amount of tax revenue.
As the Tax Policy Center demonstrated, cutting individual income tax rates by 20 percent from today’s levels would reduce tax burdens by $251 billion per year (in 2015) among households with income above $200,000.
If you leave preferential tax rates for savings and investing (e.g., long-term capital gains and dividends) untouched, as Mr. Romney has said he would do, that leaves only $165 billion of available tax expenditures that can be eliminated from this same group of high-income earners once their marginal tax rates fall.
That means there’s an $86 billion shortfall — the difference between $251 billion in tax cuts and $165 billion in potential tax increases on this high-income group — that needs to be accounted for somewhere.
By process of elimination that somewhere must be the rest of the population, the 95 percent of households earning less than about $200,000 annually.
That didn’t take very long at all to explain. But getting out of that box would not just take long, it would require healthy dollops of bullshit. So Ryan demurs.
Surely he would answer this by saying that the author is being unfair by not “dynamically scoring” or accounting for economic growth to raise revenue. Fine, then, show us that model so we can assess it. But in the absence of an alternative, we’ll just have to go with the “no specifics because it’s mathematically impossible” explanation.