COMMENTARY

It's OK to pick the tax plan that works for you

8/12/2012

Ohio voters say the economy is the biggest issue in this year's presidential election. Nothing else -- not health care nor the deficit nor national security -- comes close.

We're bullish about how the state's economy is emerging from the Great Recession, polls suggest. But we're more likely to conclude that the national economy is getting worse than that it's improving or standing still.

The differences between President Obama and Mitt Romney on economic issues, including tax policy, are clear, if we cut through the toxic campaign rhetoric and simplistic ad slogans to identify them. If you aren't making more than $200,000 or $250,000 a year, it's hard to see how Mr. Romney's tax plan would serve you better than the President's.

That perception isn't driving political support. A new Quinnipiac University/CBS News/New York Times poll gives Mr. Obama a 6-point lead over his Republican challenger among likely voters in Ohio, one of the handful of swing states that are likely to determine the outcome in November.

Yet there's no difference in our opinions -- generally negative -- of which candidate would do a better job on the economy, and how his economic policies would affect our personal finances. Half of the Ohioans who were surveyed say that Mr. Romney's business experience puts making profits ahead of creating jobs. Almost half say the President's policies aren't improving the economy and probably never will.

We're a tough crowd, but we're inconsistent in our cynicism. Just as many Ohioans say they want Obama-care repealed even as they like the new benefits it has brought them, the Ohio voters in the Quinnipiac poll agree -- by better than a 3-to-2 margin -- that federal income taxes on households that make more than $250,000 a year should go up to help cut the deficit.

President Obama seeks to do just that as he calls for ending the George W. Bush tax cuts for the wealthiest Americans, while preserving them for everyone else, including 97 percent of small-business owners. By contrast, Mr. Romney's tax plan would reserve its greatest benefits for the richest households.

That assessment comes from the Tax Policy Center, a nonpartisan joint venture of the centrist Brookings Institution and the progressive Urban Institute. The center's analysis concludes that Mr. Romney's proposal would mean a net tax increase -- of as much as $2,000 a year for families with children -- for the 95 percent of U.S. households (more than that in Ohio) that earn less than $200,000 annually. Households that make more than $1 million would get an average tax cut of $87,000, the center estimates.

Mr. Romney says he wants to cut income tax rates by 20 percent across the board, and to reduce the corporate tax rate as well. He also wants to abolish the federal estate tax and alternative minimum tax. Sort of a dessert buffet of tax cuts: The reductions for individuals alone would decrease federal tax revenue by nearly $4 trillion over a decade.

He insists his plan will pay for itself, claiming the tax cuts will stimulate economic growth by providing new incentives to work and to invest more. That will increase tax revenue and make the tax code simpler and more progressive, he says. Sounds good, but it's a lot to take on faith.

Mr. Romney pledges to reduce or eliminate some individual tax deductions, credits, and loopholes, but won't say which ones. At the same time, he says he would increase tax breaks for whatever investment income lower and middle-income families accumulate.

The Tax Policy Center estimates that making the plan's numbers add up would require getting rid of almost two-thirds of all tax breaks, many of which help poor and middle-class taxpayers more than wealthier ones. Would Mr. Romney's hit list include the popular tax breaks for home-mortgage interest, employee health benefits, charitable donations, and college tuition payments?

His campaign suggests it wouldn't, but then what's left? Whatever brand of spinach Mr. Romney plans to serve us, he doesn't think we need to see the label before the election.

Mr. Romney argues that his plan to broaden the tax base by cutting rates and closing loopholes is similar to what the bipartisan Simpson-Bowles budget commission, which Mr. Obama named, has recommended. The difference is that Simpson-Bowles acknowledged that making substantial progress on deficit reduction will require revenue increases and balanced spending cuts. Commission co-chairman Erskine Bowles says Mr. Romney's plan keeps too many tax breaks, raises middle-class taxes, and would not reduce the deficit.

Mr. Romney vows to cut spending overall, even as he seeks a substantial defense buildup. During the Republican presidential debates, he was among the candidates who insisted he wouldn't tolerate even one dollar of higher taxes for every $10 in spending cuts. President Obama's deficit-reduction plan would cut spending by about $2.50 for every $1.50 in revenue increases.

Simpson-Bowles also proposed eliminating the preferential tax treatment of capital gains and dividends, which tends to benefit wealthier taxpayers. Mr. Romney would continue to treat such income more favorably than earned income.

James Kvall, the Obama campaign's policy director, says the President's and Mr. Romney's tax proposals, as well as their contrasting stances on such Ohio-specific issues as the auto-industry bailout and federal support for alternative-energy industries, reflect different approaches to economic growth -- expanding from the middle versus from the top down.

"The President believes we need to build a stronger economy where the middle class prospers," Mr. Kvall told me last week. "Governor Romney wants to try policies that in the past decade benefited the few, failed the middle class, and led to damage to the economy."

As much as Ohioans fret about the economy, there seems to be a disconnection between many voters' desire for personal economic security and their political preferences. That observation isn't an appeal to class warfare. It's more a matter of self-interest.

David Kushma is editor of The Blade.

Contact him at: dkushma@theblade.com