Last year, GOP frontrunner Mitt Romney unveiled a plan to extend the Bush tax cuts, eliminate the estate tax and slash corporate taxes. But that proposal, one which would deliver 60 percent of its benefits to the top one percent of taxpayers while draining $6.6 trillion from the U.S. Treasury over ten years, was blasted by conservative activists, his Republican rivals and the Wall Street Journal alike as too timid. Which is why a desperate Romney last week announced a new scheme promising a 20 percent across-the-board cut for all taxpayers.
Of course, if this story sounds familiar, it should. Back in 1996, another crumbling pillar of the Republican establishment named Bob Dole gambled on a 15 percent tax cut, only to get clobbered by voters that November.
While Dole rolled out his bribe to taxpayers after defeating flat-taxer Steve Forbes and supply-sider Jack Kemp (more below), Romney upped his tax cut ante to beat back surprising challenges from Rick Santorum and Newt Gingrich potentially blocking his path to the nomination. In his Wall Street Journal op-ed Thursday, Governor Romney attacked "the say-anything-to-get-elected fiscal recklessness of some of my Republican rivals" before announcing:
"I will make an across-the-board, 20% reduction in marginal individual income tax rates. This bold stroke reduces the tax on the next dollar of income earned by all taxpayers. It also reduces tax rates for the many businesses that pay at individual rates and employ the majority of private-sector American workers, thus driving significant increases in hiring and wages."
Of course, as ThinkProgress and the Washington Post's Lori Montgomery and Ezra Klein documented, Mitt Romney's gambit would pile up debt while guaranteeing yet another tax cut windfall for the wealthy. At a time when income inequality is at its highest level in 80 years while the total federal tax burden is at its lowest in 60, Mitt Romney's risky new scheme makes George W. Bush look like Karl Marx:
According to Center for American Progress Tax and Budget Policy Director Michael Linden, Romney's tax plan contains budget-busting tax breaks for the richest Americans in the form of a permanent 20 percent across-the-board cut to marginal rates and a repeal of the Alternative Minimum Tax, which prohibits the wealthy from artificially lowering their tax rates. "The enormity of these tax cuts is mind-boggling," Linden said. "Even more unbelievable is how skewed they are to those the very top of the income ladder."
Romney's claim that his plan would promote job and economic growth while reducing the deficit is also likely false. The Bush tax cuts were promoted under the same guise, only to blow a $2.5-trillion hole in the federal budget that was accompanied by worst performance of any post-war expansion" for growth in investment, GDP, and job creation. Romney's tax cuts are even more expensive, clocking in at a cost of more than $10.7 trillion over the next decade and reducing revenue to a paltry 15 percent of GDP, according to Linden. Balancing the budget on those terms, as Romney claims he will do, would be next to impossible.
Impossible, that is, unless President Romney both savaged federal spending and eliminated deductions for workers, families and businesses that cost Uncle Sam over $1 trillion a year. But in typical Romney fashion, his campaign is refusing to say which loopholes it would close while promising to maintain the ones voters care about most. His economic adviser Glenn Hubbard admitted Romney's cowardice, explaining "it is not his intention to take on any specific deduction or exclusion and eliminate it." And as the New York Times reported, Romney promised Wednesday his plan would magically - and comically - be "revenue neutral" and raise the burden on upper-income taxpayers:
"In order to limit any impact on the deficit, because I do not want to add to the deficit, and also to make sure we continue to have progressivity in our tax code, I'm going to limit the deductions and exemptions, particularly for high-income folks," Mr. Romney, a former governor of Massachusetts, said.
"And by the way, I want to make sure that you understand, for middle-income families, the deductibility of home mortgage interest and charitable contributions, those things will continue," he said. "For high-income folks, we are going to cut back on that, so we make sure that the top 1 percent keeps paying the current share they're paying or more. We want middle-income Americans to be the place we focus our help, because it's middle-income Americans that have been hurt by this Obama economy."
(Pressed during Wednesday night's debate in Arizona, Romney recanted his Occupy-sounding language, insisting instead that, "I said that we're going to cut taxes on everyone across the country by 20 percent, including the top 1 percent.")
For its part, on Wednesday the Wall Street Journal announced its pleasure with Romney's new "Restore America's Promise" tax cut giveaway. Proclaiming that Romney "has the right policy," the Journal also praised as shrewd because "it will assume some dynamic revenue feedback from his marginal-rate cuts." Of course, Republicans said much the same thing 16 years ago when Kansas Senator and GOP nominee Bob Dole rolled out his "Restoring the American Dream" across-the-board tax cut.
In June of 1996, a New York Times/CBS News poll found that only 2 percent of those questioned thought high taxes were the most serious problem facing the country. But Bob Dole had a very serious problem: he was losing to President Bill Clinton. So, the former supply-side foe went all in on tax cuts in hopes of buying votes in the fall. As the New York Times reported in August 1996, Dole called for "a $548 billion tax-cut package highlighted by a 15 percent reduction in individual income tax rates and a halving of the capital gains tax":
Under the Dole plan, taxpayers paying the bottom rate of 15 percent in Federal income taxes would see their rate fall to 12.75 percent. Those paying a rate on their last dollar earned of 28 percent would have their rate go down to 23.8 percent. Those paying 31 percent now would pay 26.35 percent under the Dole plan, with the current 36 percent bracket declining to 30.6 percent and the 39.6 percent bracket falling to 33.66 percent.
While Democrats predicted a massive run-up in the national debt, Dole's supporters instead claimed "large part of the cost of the plan would be covered by what economists call feedback, or the amount of increased tax revenue created by the tax cut. In this case, the figure is about 27 percent, or $145 billion." Clinton's chief of staff Leon Panetta responded at the time, "This will be a gold medal flip-flop by Senator Dole in terms of his past record." That, as the Times explained, was exactly right:
During 35 years in Congress, Mr. Dole framed his political career as an advocate of reducing the deficit. He has been among his party's most caustic critics of supply-side economics, which asserts that tax cuts produce enough economic growth to offset losses in tax revenues.
Dole, after all, had instrumental in pushing Ronald Reagan to roll-back much of his massive 1981 tax cut. Despite subsequently raising taxes 11 times over the next seven years, Reagan nevertheless tripled the national debt.
Ultimately, of course, Bill Clinton recovered from his thrashing in the 1994 midterms to easily win reelection in 1996. As the Washington Post recounted:
[Clinton] countered Dole's promise of a 15 percent across-the-board cut in tax rates -- which voters never warmed up to -- with a series of smaller, targeted tax cuts.
As we fast forward to 2012, Mitt Romney is repeating Bob Dole's proposal while hoping to avoid his fate. But Romney isn't merely following in Dole's footsteps in trying to excite the Republican base by "going the full Reagan." Like Dole, a desperate Romney has repudiated his past disdain for the voodoo economics of Ronald Reagan. As Mitt put it in 1994:
"I was an independent during the time of Reagan-Bush; I'm not trying to return to Reagan-Bush."
Of course, we all know how this movie ends. American voters will see through Romney's ploy. But if somehow they don't and Mitt manages to find himself in the White House, the records of Ronald Reagan and George W. Bush show that torrents of red ink and a growing chasm between the rich and everyone else is sure to follow. For resurrecting Bob Dole's pathetic plan, Mitt Romney doesn't deserve to win in November.
But if he does, the American people will lose.
(This piece also appears at Perrspectives.)