“You can go on their website, look at Congressman Ryan’s budget. The centerpiece of Governor Romney’s entire economic plan is a new $5 trillion tax cut, a lot of it going to folks like me, a lot of it going to the wealthiest Americans.”
– President Barack Obama, August 18, 2012, Rochester, NH.
The House Republican budget proposed revenue neutral tax reform. It did not propose a net tax cut and characterizing the House Republican budget as including a large tax cut is a clear distortion.
There is broad bipartisan support for enacting tax reform that removes distortions and lowers rates.
Only by isolating the rate reductions assumed in the House Republican budget can one characterize the House Republican budget as cutting taxes, but if this approach is taken then any significant effort to reform the tax code will include large “tax cuts.”
The Bowles-Simpson, Rivlin-Domenici, and Senate Gang of Six plans all proposed tax reform that would lower rates and assumed that they would reduce tax credits by an amount necessary to cover the revenue loss of the rate reductions plus increase revenues by as much as $2.3 trillion over a decade. If the same methodology to calculate the tax cuts in the House Republican budget is applied to these bipartisan plans, then they include tax cuts of between $3.4 and $4.4 trillion.
Despite President Obama’s call for tax reform, his own budget includes nearly 100 proposed changes to the tax code, layering in more complexity and distortions to an already byzantine tax system.