Last week the Tax Policy Center (TPC) released this distributional analysis of the Romney tax plan, exploring how the plan could be made revenue-neutral, as Romney has claimed it would be. The TPC analysis found that it is impossible to pay for Romney’s proposed additional tax cuts (which are skewed heavily toward upper-income households ) with base-broadening revenue offsets (which according to the Romney plan cannot include increasing the taxation of capital income) without increasing tax burdens on net for most Americans.
What does the TPC analysis actually tell us about the Romney tax plan? It’s well summarized in Figure 2 of the TPC paper, which decomposes the bottom-line conclusion that a revenue-neutral Romney plan would give generous tax cuts to households with incomes above $250,000, paid for with net tax increases on everyone else, into two parts:
(i) how much the tax cuts from the tax rate reductions are skewed toward wealthier households, and
(ii) how much the revenue offsets from (Romney-limited) base-broadening are skewed toward lower- and middle-income households.
Combined, we would end up with a revenue-neutral (relative to a business-as-...