Says Mitt Romney’s tax plans would "give an additional $250,000 tax cut to millionaires and billionaires" while raising taxes on the middle class.
Ted Strickland on Monday, August 27th, 2012 in a campaign speech
Ted Strickland claims Romney would cut millionaires' taxes by $250,000 but raise them for middle class
Former Gov. Ted Strickland, who serves as a national co-chairman of President Obama's re-election campaign, recently made a three-day bus tour of Ohio to deliver the message that Mitt Romney and Paul Ryan are "wrong for the middle class."
Criticizing the economic plans of the Republican ticket, Strickland told a crowd in Kent that Romney's tax plans would "give an additional $250,000 tax cut to millionaires and billionaires" while raising taxes on the middle class, according to an account in the Record-Courier of Portage County.
Obama made a similar claim in Columbus in May, asserting that Romney wanted "a tax cut that gives an average of $250,000 to every millionaire in this country." On the Truth-O-Meter, that claim rated True.
PolitiFact Ohio asked the Obama campaign how Strickland's wider claim is supported.
In an email, the campaign noted that Strickland also talked about the Ryan budget plan -- the House budget resolution for fiscal 2013 that Ryan proposed -- and said he "was referencing the Romney-Ryan plan, not just Romney."
It cited an analysis by the nonpartisan Tax Policy Center, which suggests the plan likely would result in tax cuts for the wealthy, with modest or no benefits for low-income working households.
While some Democrats like to refer to Ryan’s plan as the "Romney-Ryan plan," because Romney has endorsed parts of the Ryan budget, there is no hybrid.
Romney does have his own tax plan, "and that's the budget plan that we're going to run on," he said on "60 Minutes." According to his campaign website, the plans include permanently extending the 2001-03 tax cuts, further cutting individual income tax rates by 20 percent, broadening the tax base by reducing tax preferences, eliminating taxation of investment income of most individual taxpayers, reducing the corporate income tax, eliminating the estate tax, and repealing the alternative minimum tax and the taxes enacted in 2010’s health reform legislation.
Romney’s campaign website states that lowering both individual and corporate tax rates will stimulate economic growth.
For an independent assessment of Romney’s plan, we also turned to the Tax Policy Center of the Urban Institute-Brookings Institution, a think tank that, among other things, evaluates the tax proposals submitted by presidential candidates. While judging tax proposals is subject to some degree of interpretation, the Tax Policy Center has a significant degree of respect in tax circles.
The group ran two sets of numbers for Romney's plan. One version, known as "current policy," assumes that the tax cuts initially enacted under President George W. Bush and the alternative minimum tax cuts will be extended, with or without Romney. This method only counts the taxpayer savings from the new proposals in Romney’s tax plan.
The Tax Policy Center found that under Romney’s proposal, people with $1 million or more in annual cash income will receive an average tax cut of $250,535.
The other version, known as "current law," essentially gives Romney credit for extending the Bush tax cuts and for an annual adjustment in the alternative minimum tax. Under this calculation, taxpayers’ savings from these two extensions are added to the total tax cuts from Romney’s tax proposal itself. By this method, the average tax cut for someone with cash income north of $1 million a year would be $390,876, according to the Tax Policy Center.
Even using the more restrictive of the Tax Policy Center’s two calculations, Strickland's statement about millionaires, like Obama's, is correct.
But taxes would not increase on the middle class under the plan, said Bob Williams, a senior fellow at the Tax Policy Center. Taxes would decrease for most taxpayers, although they would increase on the bottom quintile, or the poorest 20 percent of the country.
Romney has promised that low- and middle-income households will pay no larger shares of federal taxes than they do now. He also said his plan would be revenue neutral, meaning the revenue loss caused by lowering tax rates would be recouped by stimulated economic growth and by reducing or eliminating certain tax deductions and write-offs.
But Romney has not specified what tax preferences he would cut to make up lost revenue.
The Tax Policy Center looked at some of the possibilities in a second study it published Aug. 1 that analyzed the tradeoffs among the goals stated in Romney's plan, including lowering marginal tax rates, maintaining tax revenues and maintaining progressivity.
One of its authors, William Gale, vice president of Brookings and director of its economic studies program, served on President George H.W. Bush’s Council of Economic Advisers. Another, Adam Looney, a senior fellow in economic studies at Brookings who has a doctorate from Harvard University, served on Obama’s Council of Economic Advisers in 2009 and 2010.
To try and keep with Romney's guiding principles, the authors eliminated deductions and write-offs -- starting with the deductions for top earners first -- until they came up with enough revenue to offset the $360 billion in tax cuts that are part of Romney's plan. They also added in the effects of tax changes on economic growth. using a model developed by one of Romney's economic advisers, Harvard professor Greg Mankiw.
They determined that people who earn $1 million or more in taxable income would see an average net tax decrease of $87,117. They’d save $175,961 from Romney's tax cut, but lose $88,444 in deductions.
People who earn between $500,000 and $1 million would see a cut of about $17,000, and taxes for people with income between $200,000 and $500,000 would decrease by about $1,800, the study found.
But to make Romney's plan revenue neutral, deductions would also have to be removed for people with income below $200,000, and the effects of that would be significant, the study found. Eliminating the deductions would mean outright tax increases for everyone with income below $200,000. People with taxable income between $50,000 and $75,000, for example, would see an average net tax increase of $641. They’d save $984 from Romney's rate cut, but lose $2,672 in write-offs.
The authors specifically noted that taxpayers with children whose income is below $200,000 would see their taxes go up by an average of $2,041.
The reason for the increase is that the most popular tax breaks heavily benefit middle- and lower-income families -- the 95 percent of the population who earn less than $200,000 and, for example, carry mortgage debt and use employer-provided health insurance.
Though Romney has suggested he would focus on taking the deductions away from the wealthy, the study concluded that focusing on the top alone would not make up for the revenue sacrificed when rates are slashed.
Unlike John McCain and Obama, whose detailed tax plans were analyzed by the Tax Policy Center in 2008, Romney has presented a "not well defined" plan that is "very explicit about some things and non-specific about others," Williams said. "Given what he has said, it is difficult if not impossible to see a way it would not raise taxes on the middle class."
Strickland’s claim was that Romney's plan would "give an additional $250,000 tax cut to millionaires and billionaires" while raising taxes to the middle class.
He is partially accurate. A study by the Tax Policy Center about Romney's stated plans found that millionaires would get a $250,000 tax cut. But it also found those plans would cut taxes for the middle class, too, though they would raise them on the lowest-income households.
A second Tax Policy Center study, which used what Romney has said about his tax plan and attempted to calculate outcomes for different groups of taxpayers, found that making the plan revenue neutral would result in smaller tax cuts for millionaires and families with income above $200,000, but would require raising taxes on other households, including the middle class.
As long as the details of the Romney plan remain unknown, the conclusions can't be definite.
But the part of Strickland's statement about millionaires represents tax cuts they would get without accounting for tax deductions and write-offs that could be reduced or eliminated. His statement about the middle class -- who stand to lose more from changes to those deductions than they'd gain by the tax cuts -- includes them.
Those are important details that put the claim in proper context.
On the Truth-O-Meter, Strickland’s claim rates Half True.