For months, Mitt Romney had been advocating tax cut proposals that would reduce revenues by about $5 trillion over the next decade, and that were heavily tilted toward the rich. Yet he did not explain how he would pay for these cuts, just that he somehow would.
In a recent paper I wrote with two colleagues, we showed that a revenue-neutral plan that met five specific goals that Governor Romney had put forth (reducing income tax rates by 20 percent, repealing the estate tax, the alternative minimum tax, and capital income taxes for middle class households, and enhancing saving and investment) would cut taxes for households with income above $200,000, and—as a result of revenue-neutrality—would therefore necessarily have to raise taxes on taxpayers below $200,000.
This was true even when we bent over backwards to make the plan as favorable to Romney as possible. We considered an unrealistically progressive way of financing the specified tax reductions. We accounted for revenue feedback coming from potential economic growth estimates as estimated by Romney advisor Greg Mankiw. We even ignored the need to finance about a trillion dollars in Romney's proposed corporate cuts.
Our conclusion was not a prediction about Governor Romney would do as President, it was an arithmetic calculation: all of the promises couldn't be met simultaneously without resorting to tax increases on households with income below $200,000.
With both candidates referring to the study in the first debate, several responses to the study having been published, new proposals from Governor Romney on the table, and confusing and misleading partisan jabs on both sides of the aisle, it is time to take a new look at this discussion and help readers understand what is going on.