Romney proposes 20 percent income tax cut to jump-start U.S. economy

Mitt Romney speaks at a campaign rally in Mesa, Ariz
Mitt Romney speaks at a campaign rally in Mesa, Ariz ASSOCIATED PRESS

CHANDLER, Ariz. — Mitt Romney proposed Wednesday to cut individual income tax rates for all Americans by 20 percent, a promise he hopes will jumpstart his campaign for the Republican presidential nomination and the American economy.

It also could add to the government’s sky-high budget deficits and growing debt unless offset with other tax hikes or matched by sweeping cuts in spending, the kind that have eluded other Republican presidents who made similar promises.

Ronald Reagan and George W. Bush used the pledge of sweeping tax cuts to win the White House, failed to cut spending, and watched deficits soar.

“Absent anything else, this cuts revenue by a lot,” said Roberton Williams, a senior scholar at the Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute, two Washington center-left think tanks.

"To do his tax plan, and balance the budget, and protect the defense budget, is going to be very difficult,” added Josh Gordon, policy director at the Concord Coalition, a group that promotes fiscal discipline. “You would need annual spending cuts that would be about the size of the cuts the (congressional) supercommittee failed to accomplish over 10 years."

Romney insisted that his bold tax proposal would create jobs, boost the economy and would not cost the federal government a dime in lost revenue.

“I’m going to lower rates across the board for all Americans by 20 percent,” Romney told a rally at a Christian school in the Phoenix suburb of Chandler, hours before facing off with rivals in an Arizona debate. The debate was the last for the four candidates before Feb. 28 primaries in Arizona and Michigan and the March 6 Super Tuesday contests in 10 states. Romney leads in Arizona polls but is neck and neck with rival Rick Santorum in Michigan surveys.

His proposal to cut tax rates across the board was aimed politically at conservatives who have refused to rally to his campaign. Yet he also said he’d limit some deductions for wealthier Americans, a move that could open him to criticism from conservatives who chafe at any proposals aimed at the rich.

Romney compared his proposal to Reagan’s. His campaign noted that his proposal would reduce top marginal tax rates on higher incomes from 35 percent to 28 percent, noting that was the top rate that Reagan signed into law in 1986.

He said the tax cuts would boost the economy, leading to a 6 percent jump in wages at non-corporate businesses, a 10 percent increase in investment, and a 16 percent increase in business receipts. He said it would create 2.5 million jobs within two years.

Aides said Romney would make permanent the Bush-era tax cuts scheduled to expire on Dec. 31, then cut all tax rates by 20 percent. “His proposals to date actually increase the deficit by $2 trillion over the next decade. Will his new tax plan drive up the deficit even further?” Obama’s campaign said.

Indeed, even before he proposed the deep cuts in income tax rates, a Tax Policy Center analysis found that Romney’s other tax proposals would cost the government $180 billion in revenue in 2016, assuming the Bush tax cuts were extended for all taxpayers.

Although President Barack Obama this week signed an extension of a payroll tax cut that will add nearly $100 billion to this year’s deficit, his campaign ripped Romney’s proposal, saying it would add to the government’s deficits and debt.

Romney insisted the tax cuts would not add to the federal budget deficit because the economy would grow faster and he’d slash federal spending.

“The economy will grow,” said Williams, but he added: “There’s never been enough growth from tax cuts to pay for the tax cuts.”

Romney also said he’d mitigate the tax rate cut for wealthy Americans _ he did not define the income level qualifying as wealthy _ by imposing new limits on tax credits, deductions and exemptions they now get.

“The result will be a pro-growth tax code that still raises the necessary revenue, retains the existing progressivity, and ensures that middle-income Americans see real tax relief,” his campaign said.

(Thomma reported from Arizona, Lightman from Michigan.)


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