‘‘Chances are you pay a higher tax rate than [Mitt Romney]. . . . Mitt Romney made $20 million in 2010 but paid only 14 percent in taxes . . . probably less than you. Now he has a plan that would give millionaires another tax break. And raises taxes on middle-class families by up to $2,000 a year.’’
— Voice-over of new Obama campaign ad, ‘‘Stretch’’
WASHINGTON — The Obama campaign rushed to take advantage of a new Tax Policy Center study about Mitt Romney’s tax plan, combining it with information about Romney’s 2010 tax return. We have looked at these issues before but as these ads go, the language is fairly careful and restrained. Let’s take a deeper look.
Romney certainly made a lot of money in 2010 — $21.7 million, according to his tax return — and yet his tax rate was about 13.9 percent. As we have noted before, he achieves this rate because much of his income is treated as capital gains and dividends, which are taxed at a preferential rate of 15 percent, and because he donates about 14 percent of his income to charity.
In the past, we gave the Obama campaign credit for saying that Romney paid ‘‘much less than what many middle-class families pay.’’ But the language in this ad is much more accurate.
The ad says, ‘‘Chances are you pay a higher rate’’ and that Romney’s 14 percent rate is ‘‘probably less than you’’ pay. Most people pay relatively little in individual income taxes, but (unlike Romney) also contribute a good portion of their income to payroll taxes (such as Social Security and Medicare). Employers also pay a share, which most economists say is taken out of a person’s wage.
According to the nonpartisan Tax Policy Center, the effective rate for the middle 20 percent is 15.5 percent, including all payroll taxes. That is higher than Romney’s 13.9 percent rate, so there is more than a 50-50 chance that a person’s rate would be higher than Romney’s tax rate.
The rest of the ad concerns the new study by the Tax Policy Center, which examines whether the numbers add up in Romney’s tax plan as described on his website.
As we have noted, Romney has not detailed how he would cut tax rates by 20 percent and yet eliminate enough tax loopholes to keep the plan revenue neutral.
The study essentially concludes that, no matter what choices are made, taxes will be lower for the very wealthy while raised for most middle- and lower-income taxpayers. That is because there are not enough loopholes to close for the rich — and the real money available to boost revenue would come from getting rid of tax credits that mostly benefit middle-income taxpayers, such as the home mortgage deduction.
The study came to this conclusion even after trying to grant every positive assumption to the Romney plan.
The ad accurately describes the main points of the study, using headlines such as from The Wall Street Journal to underline its points: ‘‘Study: Romney’s Tax Plan Hits Middle Class.’’
The Romney campaign has emphatically rejected the study on several grounds. First, it claims the paper is ‘‘biased’’ because of the involvement of an economist (Adam Looney) who worked on the staff of Obama’s Council of Economic Advisers, or CEA. Second, it says it ignores ‘‘pro-growth elements’’ of Romney’s plan, such as corporate tax reform and reduced deficits. Finally, it says the study admits it is not really examining Romney’s plan.
The charge of bias is ridiculous. Looney, the third name on the paper, was an economist, not a principal, on it and spent six years as an economist at the Federal Reserve Board. The economist positions at the CEA, in fact, are nonpartisan.
Indeed, another co-author of the study, William Gale, was an economist for CEA during the George H.W. Bush administration.
The Romney campaign would have more credibility to claim bias if it had not approvingly cited the Tax Policy Center as providing ‘‘an objective, third-party analysis’’ when the group critically examined the tax plan of Texas Governor Rick Perry.
In a town full of partisans, the Tax Policy Center is about as even-handed and nonpartisan as possible. The staff roster consists of serious and credible analysts.
It is also a bit rich for the Romney plan to complain that the paper does not really examine Romney’s plan — or is missing key elements — when the major problem with the plan is that Romney has released precious few details about it.