Pres. Obama says Mitt Romney is giving the rich a $5 Trillion dollar tax break. So… I looked at the math using Obama’s assumptions. What Romney is proposing is a 20% decrease in taxes for everyone, and elimination of deductions to offset it. Basically, he’s trying to flatten the tax structure by lowering rates and eliminating deductions. Here’s where I don’t understand Obama’s math in arriving at a $5 Trillion break for the wealthy (the top 1%): Currently, the top 1% pays 36% of the taxes collected by the IRS (based on IRS data). Total tax revenues are approximately $2,468 billion. So 36% of that is $888.48 billion. Romney wants to reduce that by 20%. Let’s assume that elimination of deductions just doesn’t happen at all. 20% of $888.48 billion is $177.69 billion. Extended out over ten years, that’s (obviously) $1.7769 trillion. Correct? Um… That’s not $5 trillion.
Now, Romney is saying that he wants to cut taxes by 20% for EVERY tax rate. The closest I can come to Obama’s $5 Trillion dollar figure, you’d have to look at the entire amount of taxes collected from everyone ($2,468 billion) and apply the 20% tax break (and assume no elimination of deductions and loop holes and that no economic growth was spurred by the lowering of rates and simplification of the tax code). So with EVERYBODY–including a 20% break for the middle class– included, you get 20% of $2,468 billion is $493.6 billion. Multiplied over ten years, that’s $4,936 billion, almost $5 trillion.
But Obama isn’t saying that Romney wants to give ALL of the American tax payers a $5 Trillion tax break over ten years. He’s claiming Romney wants to give “the rich” (the top 1%) a 5 trillion dollar tax break.
He claims it’s simple math. I just did the simple math. Either Obama is completely misrepresenting Romney’s plan (saying the $5 trillion is only for the rich, and claiming the closing of deductions and loopholes won’t help–contrary, by the way with historical experience during the Reagan administration, where rates on the top earners were cut from 70% to 28% and deductions and loopholes were eliminated and revenues actually went up 50%–and that there will be no economic growth spurred by the lowering of rates and simplification of the tax code), or Obama is saying that NO American, including the middle class, should get a 20% tax reduction.
By the way… I did this on my own, just using the IRS data and doing math. It just kept bugging me when Obama said that the rich were going to get a $5 trillion tax break because I knew that the top 1% pays 36% of the taxes (a pretty damned significant proportion, by the way) and it just didn’t seem like that would add up to the claimed $5 trillion dollars, even over 10 years.
As I mentioned, the other thing he does is completely discount the difference that would be made by closing loopholes and eliminating deductions (flattening and simplifying the tax code). He takes the typical static view, where a 20% cut means 20% less revenue. And in his plan an increase from 35 to 39% (or whatever it is) will result in a 4% increase in revenue. The real world never ever works that way. Lowering taxes always results in more revenue because of less tax avoidance and more wealth creation in the private sector, and raising taxes always results in more tax avoidance. It’s just the way it is. But… That would be dealing with reality, and President Obama either doesn’t know that, or doesn’t want to deal with reality. Or, of course, he’s just gotten very comfortable lying.