"If Gov. Romney's plan goes into effect … the average senior would have to pay $460 a year more in tax for their Social Security."
Joe Biden on Friday, September 28th, 2012 in a campaign rally in Boca Raton, Fla.
Joe Biden says Mitt Romney’s plan will raise taxes on Social Security benefits
Vice President Joe Biden used his podium in the retirement mecca of Boca Raton, Fla., to push the message that Mitt Romney plans to raise taxes on millions of seniors.
At a rally on Sept. 28, 2012, Biden told the crowd, "If Gov. Romney's plan goes into effect, it can mean that everyone -- every one of you -- would be paying more on taxes on your Social Security. The average senior would have to pay $460 a year more in tax for their Social Security."
The statement draws on an analysis by the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution that evaluates tax proposals submitted by presidential candidates.
The Obama campaign has used the study to make a number of claims about Romney’s plan, at times leaping to a worst-case-scenario conclusion. Here, we’ll check whether Biden’s statement accurately reflects how Romney’s proposal could impact Social Security benefits.
Romney’s tax proposal
Romney has not released a complete tax plan, but he has outlined some specifics on his campaign website. They include: cutting marginal rates by 20 percent on a permanent, across-the-board basis; eliminating interest, dividend and capital gains taxes for taxpayers earning less than $200,000; eliminating the estate tax; and repealing the Alternative Minimum Tax. He also has suggested these general guidelines:
• The rate cuts would be paid for without adding to the deficit.
• People at the high end "will still pay the same share of the tax burden they’re paying now."
• Everyone would see tax rate reductions.
Romney would also cut the corporate rate to 25 percent.
To offset those cuts, Romney has indicated that he would eliminate some common tax write-offs and deductions for people with high incomes, though he hasn’t said which ones would go away.
Digging into the plan
Knowing all that, the Tax Policy Center study attempted to discern the effect of Romney’s tax rate cuts combined with the elimination of several deductions such as the mortgage interest deduction, charitable giving deduction and the exclusion for health insurance.
To keep with Romney's guiding principles, the authors eliminated deductions and write-offs for top earners first. They determined that in order to reach the $360 billion needed to offset the rate cut, deductions would also have to be axed for people with incomes below $200,000. The effects of that were significant, the authors found. Many popular tax breaks are of greatest benefit to middle- and lower-income families, so eliminating them meant outright tax increases for everyone with incomes below $200,000.
This is where Biden’s Social Security claim comes in.
Couples making less than $32,000 pay no taxes on their Social Security income. Those making between $32,000 and $44,000 pay taxes on 50 percent of Social Security, while those above $44,000 are taxed on 85 percent of their benefits.
The Obama campaign pointed out that in 2010, just over 29 million income tax returns were filed with untaxed Social Security and Railroad Retirement Benefits from individuals making $200,000 or less, for a total of about $29 billion in total benefits. So the average tax benefit was $987. Under Romney’s plan, the value of the tax benefit would be reduced to $789, the campaign reasoned.
The Tax Policy Center study determined that 58 percent of middle-class taxpayers’ deductions would have to be eliminated to make Romney’s plan work. So by the Obama campaign’s math, when deductions are cut by that much, the average tax benefit on Social Security income would be further reduced to $331, the equivalent of a $458 tax increase.
The problem with that math
The bottom line of the Tax Policy Center study is that Romney can't keep all his goals based on what is known of his plan. Unless some factors are tweaked, many middle-class taxpayers would end up paying more. Romney has said repeatedly he won’t let that happen.
In addition, there are factors the study, admittedly, does not take into account. It doesn’t factor in Romney’s proposed spending cuts, or the expected economic growth that would result from the rate cuts and lead to greater revenues. In a Frequently Asked Questions fact sheet, the study’s authors acknowledge that Romney’s plan cannot be fully scored because it lacks detail. Their study, they said, examines the "broad implications."
They also state directly that the study does not say Romney wants to raise taxes on the middle class.
"We said that simultaneously achieving all (of his tax goals) would result in lower taxes for high-income households and thus – because of the revenue-neutrality constraint – would require raising taxes on other households," the authors wrote.
Donald Marron, the Tax Policy Center director, wrote on the center’s blog, "I don’t interpret this as evidence that Gov. Romney wants to increase taxes on the middle class."
Although Romney has not shown how he would pay for his rate cuts, he has said he will protect deductions for the middle class. His campaign has floated some vague ideas, such as capping the value of some deductions for high earners, which could be one way to keep the tax burden from increasing for those further down the income scale.
Biden said that under Romney’s tax plan "the average senior would have to pay $460 a year more in tax for their Social Security."
That figure is just one way to fill in the blanks in Romney’s largely unexplained tax proposal. It’s an average of a hypothetical, and it’s at odds with what Romney has said he’ll do, which is to protect deductions for the middle class and not raise taxes.
Biden’s comment leaps to several conclusions to arrive at the dollar figure he cites. We rate it Mostly False.
Published: Friday, October 5th, 2012 at 6:08 p.m.
Remarks by Vice President Joe Biden at a Campaign Event in Boca Raton, Fla., Sept. 28, 2012, transcript via Nexis
Tax Policy Center, "On the Distributional Effects of Base-Broadening Income Tax Reform," Aug. 1, 2012
PolitiFact, "Obama says Romney could take away middle class tax deductions," Sept. 24, 2012
Fortune, "Mitt Romney: Rich taxpayers will pay their share," Aug. 15, 2012
Email interview with Kara Carscaden, Obama campaign, Oct. 1, 2012
Email interview with Robert Terra, Romney campaign, Sept. 28, 2012
TaxVox blog, "Understanding TPC’s Analysis of Governor Romney’s Tax Plan," Aug. 8, 2012
Tax Policy Center, "Implications of Governor Romney’s Tax Proposals: FAQs and Responses," Aug. 16, 2012
Bloomberg News, "Romney Tax Cuts Work Only When Mortgage Break Mostly Reduced," Sept. 14, 2012
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