## Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them

In a recent paper, we showed that any revenue-neutral tax reform that included Governor Romney’s specific tax cuts and that met his stated goal of not raising taxes on saving and investment would cut taxes for households with income above $200,000 and would therefore necessarily have to raise taxes on taxpayers below $200,000. This was true even when we considered an unrealistically progressive way of financing the specified tax reductions, and even when we accounted for economic growth and revenue feedback.

Writing in Wednesday’s Wall Street Journal, Romney economic adviser Martin Feldstein attempts to contradict our finding. Instead, his analysis actually ** confirms** our central result. Under the stated assumptions in Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more. (Feldstein uses a different income measure than we do – see technical note at end.)

Taxes would rise on families earning between $100,000 and $200,000 in Feldstein’s analysis because he considers a tax reform that would completely eliminate itemized deductions for taxpayers with income above $100,000. In 2009, taxpayers earning between $100,000 and $200,000 claimed more than half of these itemized deductions. Eliminating itemized deductions would raise more in taxes from people in this group than they would save from the rate reductions and other specified features of Governor Romney’s plan.

While his results confirm our earlier finding, Feldstein employs several questionable assumptions that understate the revenue loss of Governor Romney’s tax cuts and overstate the revenue gains from reducing tax breaks and deductions. Under more reasonable assumptions, Feldstein’s version of the Romney proposals would not be revenue-neutral; instead it would result in large revenue losses. Specifically:

1. He assumes that each dollar of itemized deductions lost by households with income above $100,000 would generate 30 cents in revenue. However, the Romney plan has a maximum tax rate of only 28 percent and most households with income above $100,000 would face an even lower rate on some or all of the additional income from eliminating deductions.

2. He assumes that taxpayers earning more than $100,000 who currently itemize would lose not only their itemized deductions but also their ability to take the standard deduction. Normally, taxpayers have the option of itemizing their deductions or taking the standard deduction.

If the standard deduction were retained for all households, and denying itemized deductions was assumed to raise revenue at a more realistic average marginal tax rate of 24 percent under Romney’s plan, Feldstein’s proposals would fall about $70 billion short of revenue-neutral, even if taxpayers don’t change their behavior.

However, JCT and Treasury estimates consistently show that the revenue generated by eliminating such deductions would be even lower because taxpayers would change their behavior. For example, taxpayers with positive interest income would likely pay down their mortgages if the mortgage interest deduction were eliminated, thereby reducing their taxable investment income. Hence, the revenue available from eliminating these items is smaller than Feldstein’s static estimates suggest, even after using an appropriate average marginal tax rate.

3. Feldstein does not offer a specific way to pay for the costs of repealing the estate tax, instead pointing to “other base broadening changes” and arguing that the estate tax repeal could actually raise revenue on net. The estate tax raised $21 billion in 2009, and the JCT, CBO, and Treasury have consistently estimated that estate tax repeal would not only lose revenue but could actually lose *more* revenue than the listed estate tax revenues, because it would create opportunities for tax avoidance.

Taking the estate tax and other effects into account, Feldstein’s proposals come up at least $90 billion short of revenue-neutral.

Although Feldstein uses a different methodology than we did, his analysis reinforces our central finding about the distributional impact of Romney’s tax proposals: the net effect would be cutting taxes on households above $200,000 and thus requiring net tax increases on households with less income. More broadly, both our analysis and Feldstein’s show that Romney’s tax plan cannot accomplish all of his stated goals. Either taxes must rise on those with income below $200,000, or tax preferences for saving and investment will have to be reduced, or revenues will be cut, or promised tax cuts for high-income households will have to be reduced. Trade-offs exist and solutions are possible, but tax reform cannot do everything that it is sometimes asked to do.

In addition, both Feldstein and we use stylized reforms that could not be implemented in practice and that overstate the progressivity of any cut in deduction or exemption. Under Feldstein’s proposals, for example, taxpayers earning $99,999 would pay dramatically lower taxes than an individual earning only one dollar more—implying enormous marginal tax rates. Any realistic, practical plan to limit tax expenditure cuts to a high-income group would require a phase-in of the cuts or other accommodations, which would add to marginal tax rates, reduce the potential revenue gain, and make the resulting tax change more regressive.

Finally, the debate over what is or isn’t possible distracts from the more important question of what the Romney plan actually is. The governor could settle this issue quickly simply by describing how he’d pay for his tax cuts.

Technical note: Feldstein uses adjusted gross income as his income measure. We use cash income, which is somewhat larger than adjusted gross income. His group of households with AGI of $100,000 and up filed 12.4 percent of tax returns in 2009; our group of households with cash income of $200,000 and up will file 6.3 percent of all tax returns in 2015.

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[…] The Tax Policy Center even proves that Romney’s economic adviser, Martin Feldstein, confirms their findings in his attempted defense of the Romney budget in the Wall Street […]

[…] more than they do now. But the estate tax raised $21 billion in 2009 and repealing it would likely cost even more than that. Romney’s corporate tax cuts would cost about $100 billion per year and mostly benefit wealthy […]

[…] to show that Romney’s tax plan would raise middle class taxes. Romney just needs to ask his own advisors who have made it clear that the only way his tax plan add up is by raising taxes on the very […]

[…] of deductions by 20%, while he also ignored Romneys repeal of the estate tax. The Tax Policy Center found that taking the estate tax and other effects into account, Feldsteins proposals come up at least […]

[…] The Tax Policy Center even proves that Romney’s economic adviser, Martin Feldstein, confirms their findings in his attempted defense of the Romney budget in the Wall Street […]

[…] then the matter simmered for a while, except for some expressions of disbelief from the nonpartisan, nonprofit Tax Policy Center, saying Feldstein’s defense of Romney’s plan did indeed prove their point: That it […]

[…] how did he get to such a different conclusion? The short answer is he made some very different assumptions than did the Tax Policy Center. The long answer is that his conclusion may not be as different as […]

[…] out the flaws in Marty Feldstein’s WSJ op-ed, plus a TPC analysis of the myriad ways Marty went […]

[…] Tax Policy Center responded to Feldstein’s article in a recent blog post, claiming the economist confirmed the organization’s findings rather than refuting […]

[…] TaxVox, Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them […]

[…] TaxVox » Blog Archive » Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them: [W]e showed that any revenue-neutral tax reform that included Governor Romney’s specific tax cuts and that met his stated goal of not raising taxes on saving and investment would cut taxes for households with income above $200,000 and would therefore necessarily have to raise taxes on taxpayers below $200,000… even when we considered an unrealistically progressive way of financing the specified tax reductions, and even when we accounted for economic growth and revenue feedback…. Romney economic adviser Martin Feldstein attempts to contradict our finding… [but] confirms our central result…. [I]n Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more…. […]

[…] Tax Policy Center responds to Martin […]

Can you guys step into the new millennium please and shift the site from far left to center of the screen?

Thanks in advance.

You’re standing far off to the right. You can see better from the middle.

Sorry, 2+2=4. It doesn’t matter of the person who says that is left or right. 2+2=4.

Feldstein made errors and this article points them out. It is too bad that the errors lead to conclusions that do not support your politics, but they do.

Accept that.

I don’t think that’s a political complaint. The article is literally on the left side of the screen, oddly only using half the space available to it.

Actually, that misinterpretation is pretty funny. It *is* on the far left.

BTW, is that really your name, or did you steal my 19th century physicist naming convention?

In reality, the real tax rate is much more complicated than your or even Romney’s analysis. Technically, I am in the 33% (marginal)rate but since I pay the AMT it really is 26% — which shows up absolutely nowhere in anybody’s calculations. In my case, I would probably not benefit from eliminating my deductions. If I may suggest, in the past you have produced a tax calculator so each of us can determine which proposal would benefit us. I really do not trust collective generalities.

I seem to remember where in the past you could had another calculation where various tax and expenditure cuts were able to be checked and the total calculated.

Thanks ‘Vivian’, I was more than a little suspicious when I saw the crowing on Brad DeLong’s blog. It seemed an overly complicated way to analyze something that should be simple. You’ve shown just what that is.

“He assumes that each dollar of itemized deductions lost by households with income above $100,000 would generate 30 cents in revenue. However, the Romney plan has a maximum tax rate of only 28 percent and most households with income above $100,000 would face an even lower rate on some or all of the additional income from eliminating deductions.”

I’ve been following this line of thinking (I’m not going to call it logic) of the TPC for some time. An earlier paper by the TPC indicated that reducing the marginal tax rate would make it harder to make up the loss of income by eliminating exemptions. That makes no sense to me if the two things (reduction of rates and elimination of tax expenditures) happen, as proposed, in the same package. In other words, the revenue gained from eliminating tax expenditures should be calculated against a current baseline and not a *new* baseline that will be created after tax rates are lowered.

What the TPC seems to be doing in its revenue estimates is a two stage analysis that creates a new baseline for calculating the benefits of eliminating deductions. In stage 1, to account for revenue *lost* they appear to reduce revenue by taking current revenue (before tax exenditures) against current marginal rates and then reducing the anticipated revenue per that differential (e.g. current revenue times 35 percent minus current revenue times 28 percent). Then, in stage two, to account for the revenue *gained* by eliminating tax expenditures, they take the *new lower* marginal rate (28 percent in my example) times historical tax expenditures. If this is what they are doing, and the comment above and elsewhere suggests that is the case, their math strikes me as wrong. And, it appears to be what they have been doing—otherwise the reduction in marginal rates is irrelevant to how much revenue eliminating expenditures will make against a current and consistent baseline.

Let’s take an example to demonstrate this. Assume taxpayer has $1000 of income and $200 of tax deductions when the rate is 35 percent. Then, let’s assume the rate is dropped to 28 percent and the deductions are eliminated.

If I use the process described above, which appears to be what the TPC has done, the loss of revenue from the rate reduction is $70 (.35-.28) x $1,000) and the gain in revenue from eliminating the expenditures is only $56 ($200 x .28). Thus, the net revenue loss is $14 ($70-$56).

That, however, does not reflect reality, as the following check confirms:

Before tax law changes to rates and deductions

$1,000

– 200

________

$ 800

x .35

= $280 tax

After tax law changes to rates and deductions

$1,000

-0 deductions

= 1,000

x .28

= $280 tax

In reality, there is no loss of revenue.

Of course, another way to express the same result as the second example would be to take for the revenue loss due to the rate reduction 28% times the taxpayer’s historical *taxable income* rather than *gross income* Thus, (35%-28% ) x $800 = $56, the same as the gain in revenue by taking .28 times $200. But, that does not seem consistent with the TPC’s prior statements on this and the comment above. It makes as much sense to me to say that “eliminating tax expenditures makes it easier to pay for the reduction of tax rates” as it does “reducing tax rates makes it harder for eliminating tax expenidtures to pay for them” and yet the former is the only thing the TPC has been emphasizing now for several months now.

Of course, the TPC could easily resolve this (and many other technical issues entailed in their analysis) if they would simply reveal their methodology and the detailed numbers behind their assumptions and analysis. Given their repeated demands for the Romney campaign to reveal a detailed tax proposal, it seems only appropriate that the TPC, which is supposedly not constrained by political exigencies, should lead by example and reveal their detailed analysis. Until that happens, this purported “rebuttal” proves nothing and the repeated calls for revealing a detailed proposal ring hollow and hypocritical. If it is true, as alleged by the TPC, that “Under the stated assumptions in Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more” show us your math as to how you arrived at this result.

“It makes as much sense to me to say that “eliminating tax expenditures makes it easier to pay for the reduction of tax rates” as it does “reducing tax rates makes it harder for eliminating tax expenidtures to pay for them” and yet the former is the only thing the TPC has been emphasizing now for several months now.”

I meant to write “and yet the latter” in the above sentence. Again, it makes as much sense that eliminating tax expenditures makes it easier to reduce rates as it does reducing rates makes it harder to eliminate expenditures. Why all the emphasis on the latter and not the former?

The Martin Feldstein article says:

“Consider first the cost of the 20% reduction in all tax rates. The income-tax revenue in 2009 before all tax credits was $953 billion. Of this, $49 billion was from taxing dividends and capital gains at reduced rates that would not be subject to further reductions. So the 20% reduction applies to $904 billion and would produce what Washington tax analysts call a “static” revenue loss—that is, the revenue loss if the lower rates didn’t cause taxpayers to change their behavior—of $181 billion.”

In effect, the cost of the cut is calculated using the post-deduction taxable income only — the equivalent of doing (35%-28%)*$800 in your example. This can be compared to 28% of $200 but not 35% (as you correctly state).

So the TPC and Brad Delong are right and Martin Feldstein are wrong.

Ankit,

You are merely guessing that the TPC is right. Feldstein’s math is quite simple and there for you to see. Have you checked the TPC’s math and methodology? How can you be sure they have not done what I’ve suggested they may have done? Unless you have access to information I don’t have access to, that would be impossible. You are merely guessing. Perhaps your guess is correct, but it is only a guess. I’m merely going on what the TPC has put out there so far, and have extrapolated from what I reasonably suspect they are doing. Of course, they are free to rebut if what they are doing is different.

Until then, we can take the same tack as they have regarding Romney’s plan. Make assumptions when details are lacking—guilty until proven innocent. Not exactly the American way, but I think a precedent has been set here.

Vivian, with all due respect you don’t make sense. The TPC’s method is clearly laid out in the full paper, admittedly a long pdf file. Feldstein’s calculations, on the other hand, contain an extremely simple algebraic mistake, namely the use of a wrong tax rate when calculating revenue gained from tax base broadening. There is no room for opinion here: Feldstein literally claimed that 2+2>5 (because he implied 152>186, from which I can derive 2+2>5 for you in a few lines).

Vivan — I honestly haven’t read the TPC pdf being referred to. My point is only that Mr Feldstein’s approach yields a result that is consistent with the TPC conclusions IF THE MATH IS DONE RIGHT.

So if we can agree that Mr Feldstein’s math is incorrect, and that he should use the ~24% rate on closed deductions given how he calculates the decrease in revenue, then there really is no disagreement.

I don’t quite follow your logic, but your math doesn’t make sense. You cherry-picked your numbers to show revenue neutrality, but if you change the amount of itemized deductions to, say, $150, the revenue loss would be $17.5 according to your method[($1000-150)*0.35=$297.5 and ($1000-0)*0.28=$280, Loss = $280-297.5=-$17.5] . Therefore, you can’t play with random numbers here, need to look at historical numbers.

See comment at 7:29 pm below.

Just to respond to your calculation and not any other argument. You are assuming too much to come to your conclusion.

Let’s say instead of $200 the deductions were $100. Then before tax changes the revenue would have been $315 = (1000 – 100) * 0.35. But after changes the revenue would be $280 = (1000 – 0) * 0.28. A loss of $35.

Now let’s say the deductions were $300. The pre change revenue would have been = $245. Post change a gain of $35.

To arrive at your conclusion of no loss of revenue by cutting tax rate by 20% and eliminating deductions, the deductions have to be 20% – equal to what Gov. Romney is proposing otherwise it will not be revenue neutral.

The original report of TPC contains more details that answer your concerns regarding methodology and math. Prof. Feldstein missed something in his calculations/analysis and Prof. DeLong is correct.

Well, the claim is that the Romney proposal is ‘mathematically impossible’, and you’ve just shown that that isn’t true.

Possibly you don’t understand that the argument is that there aren’t that enough tax breaks in the tax code that you CAN cut it. If you cut ALL of the tax breaks for people making over $250k it still doesn’t make up for the tax break you’re giving the people making over $250k, and therefore it is mathematically impossible to remain revenue neutral without raising the taxes of people below $250k.

Is that easier to understand? Or are you one of those people whose job (or sense of self-worth, or whatever) requires you not to understand this particular thing?

Sorry to disappoint you, I did no such thing. What I showed is the dangers of making curve-fitting assumptions. Gov. Romney’s proposal is ‘mathematically possible’ only by making impractical assumptions.

Could you please specify which assumptions would be “impractical”. I’m not sure the issue is one of practicality, but of reasonableness. Agreed that that the assumptions made are crucial to the outcome; however, I’ve got a few problems with the assumptions made in the original analysis and that is only based on the little information the TPC has disclosed. If they would disclose the actual numbers behind all their assumptions, this discussion would be much more interesting and meaningful.

Sunil,

I think Fred’s comment was directed at Patrick, not you.

Bill/Fred, My comment was a reply to Patrick. I think before I could post it Fred posted his comment so my comment followed his.

Vivian, if you are interested in knowing about TPC’s analysis then you should read the original analysis and various reports mentioned in the footnotes. But if you want to assume that Romney’s math is correct then nobody can stop you.

Sunil,

I’ve read the TPC reports. They are primarily conclusory in nature and don’t give enough detail to examine their merit.

What I’ve asked you is which assumptions you think Romney made that are “impractical”. If you want to engage in a serious discussion, then be responsive, not evasive.

You are missing the point (I’m not surprised). The point is that the method I’ve assumed may have been used by the TPC underestimates the revenue gain or overestimates the revenue loss as the case may be. The particular case does not matter. Each case is different, but the direction of the error, if the method I’ve assumed has been followed, is always the same.

To take your first example:

The actual loss is $35, we can agree on that. But, if I take a two-step analysis using current rates for the revenue loss and lower rates for the revenue gain, the actual loss calculated would be $42, not $35: $1,000 x (.35-.28) = $70 loss from rate reduction. $100 x .28 = $28 gain from eliminating a $100 deduction. The net revenue loss is $42 ($70-$28) rather than the actual revenue loss of $35.

How does what you incorrectly state prove Professor DeLong correct?

Like I said before, the TPC can come forward and reveal further details regarding their analysis that would help everyone concerned understand what is behind their conclusions. What is fair for Romney is fair for the TPC. Do you disagree?

You realize your calculations are all wrong. Rates apply to taxable income. So the tax cut is based on $800 of income…$56. Got it? Run it the other way, you’ll end up in the same place.

Seriously? You think TPC doesn’t know how to calculate taxes?

So that works nice for $1000 but leave all number the same and use $2000 with a $200 deduction

(2000- 200)* .35 = 630

(2000- 0) * .28 = 560

oops loss of revenue

What can I say? You obviously have not read and understood the original comment. Maybe it is easier for you to read my reply to Sunil above. Each case is different. What matters is not whether a particular example generates a revenue gain or loss, but whether the method used to estimate the revenue effects overstates or understates the revenue gain or loss compared with what actually happens. Re-work the math using your numbers and the example I gave immediately above your comment.

Let me put this another way. The example you give does not reflect the method I am surmising the TPC used. I am surmising they used a different rate for the revenue loss from tax rate reductions and a different rate (the new lower rate) for the revenue gain from eliminating tax deductions. If you agree that the method you are using is correct for determining the difference between the revenue pre- and post-tax change ($70), then I agree. And, because we agree, you must necessarily disagree with the method I surmise the TPC used as described in my original comment. The method I described in my original comment would have produced a loss of revenue of $84, which your example proves is wrong.

Vivian,

I understand how the tax policy center arrived at their conclusion. You are assuming something that Romney/Ryan have not proposed, that there would be no deducations at all. In fact, neither Romney or Ryan have proposed a single deduction that they would eliminate. So in your example

(1000 – 200) * 0.35 == $280 tax

(1000 – 200) * 0.28 == $244 tax

In fact it is worse than that because both Romney and Ryan want to eliminate the estate tax and lower corporate taxes. Unless you can read Romney’s mind, there is no way of knowing what, if any, deductions he would eliminate and the safe bet is they would eliminate none. Well, maybe the earned income tax credit, because that only benefits the working poor, and really, who cares about them?

Robert W.,

My example is merely to show the difference between two methods of calculating revenue effects from a contemporaneous tax rate reduction and elimination of (some) tax expenditures. To do show this, it is not relevant whether all tax expenditures are eliminated or only some. The effect of a faulty method will show up in either case.

Several readers seem to be placing emphasis on the fact that my example above is revenue neutral. That was simply fortuitous, but a happy coincidence nonetheless. (I was about to write that it was a good example of serendipity, but that would not be true because this was not the example that brought me to this particular “discovery”). Rather, the point was (see comment to Sunil below) to question the method of scoring revenue gain/loss that I suspected the TPC may be using. That method, if it is used, would tend to understate the net revenue gain or overstate the net revenue loss from *any* contemporaneous combination of reducing marginal tax rates and eliminating tax expenditures.

Vivian,

I have not been following this debate closely, so forgive me if I’m completely off base, but I wonder if the issue is that the tax plans are talking about marginal tax rates rather than overall effective tax rates. My understanding of the Romney plan is that all marginal rates for non-investment income are decreased 20%. Since all the marginal rates go down 20%, it is the same as the overall rate going down 20%, and you can calculate revenue loss as 20% of prior revenues. However, eliminating deductions increases your taxable income, and those increases are taxed at your marginal rate, not your effective rate. Therefore, eliminating deductions when marginal rates are 28% is different than when the marginal rate is 35%, and the revenue gain will be lower when rates are 28%. I think that is why TPC did the math the way they did.

I’m going to try to use your numbers and some very simplified tax brackets to test my idea. Let’s assume 3 initial brackets of 10, 15, and 20% that kick in at $0, $250, and $500, respectively. After a 20% decrease in marginal rates, the brackets become 8, 12, and 16%, respectively.

Using your initial numbers ($1000 of [non-investment] income and $200 in deductions), then before the tax law changes with my made-up brackets, you get:

$1000

-$200

——–

$800 of taxable income

$250 x 0.10 = $25

$250 x 0.15 = $37.5

$300 x 0.20 = $60

Total tax on $800 is $25 + $37.5 + $60 = $122.5

Now, after a 20% decrease in all marginal rates and elimination of all deductions, we get:

$1000

-$0

——–

$1000 of taxable income

$250 x 0.08 = $20

$250 x 0.12 = $30

$300 x 0.16 = $48

$200 x 0.16 = $32

Total tax on $1000 is $20 + $30 + $48 + $32 = $130

So, net change in taxes collected is $130 – $122.5 = $7.50 (gain, in this hypothetical example)

Now, here is how the TPC would get to the same answer:

Before change, revenue (tax) is $122.5, so after a 20% decrease in all marginal rates, we get

$122.5 x 0.20 = $24.5 of lost revenue

Eliminating the $200 in deductions and taxing at the new marginal rate of 16%, we get

$200 x 0.16% = $32 of gained revenue

So net change in revenue is $32 – $24.5 = $7.50 gain in revenue, exactly the same as using the long form math you suggested should be used.

However, to use your terms, they are using one rate (20%) to calculate revenue loss and another rate (16%) to calculate revenue gains. But this is OK because it reflects how the underlying marginal rates work.

Now, obviously, I didn’t cherry-pick numbers to make my version of the Romney plan look bad. In my version, revenue goes up, but my numbers are completely unrealistic. I trust the TPC to use the right numbers for brackets and marginal rates, apply the same logic shown above, and reach their answer.

Another way to think about your hypothetical example is that your $1000 of income was the amount of income that fell into the highest tax bracket, but you ignored the income that falls in the lower tax brackets. That initial income (let’s say around $100,000 to get in the ballpark of the brackets we are talking about) will be affected by the across the board drop in marginal rates, and the government will lose that revenue outright. However, the revenue gain from elimination of deductions only occurs at the marginal rate, and will thus be affected by the marginal rate in the new law, and a lower marginal rate means less revenue gain from the deduction elimination. Whether the net effect will be revenue neutral, a gain, or a loss depends on the real numbers, but I think your hypothetical example is wrong because it ignores tax brackets and marginal rates.

How sad. All that hard work on my part only to realize that “Duh” and Ankit above had it right, and it has nothing to do with marginal rates and tax brackets (although I do think it helps clarify thing a bit). Vivian, the mistake you made in your first post is saying that the TPC calculated revenue loss as 20% of revenue before tax expenditures (1000 in your example) when what they really do is 20% of revenue after tax deductions (800 in your example). Making that one change, your numbers line up with theirs. Maybe the confusion came because in the Feldstein article, he says “revenue in 2009 before all tax credits”, but credits are only one kind of tax expenditure and don’t include deductions, which is what you were talking about in your example. Still, I hope my example shows why the new marginal rate (not the old one) is all that matters in figuring out how much revenue is gained by eliminating a given amount of deductions, and why you can simplify it by thinking of the revenue loss and revenue gain independently.

Jason A.,

Thanks for your effort. Of course, in my original post I indicated that the method you describe would end up the same (taking tax expenditures after deductions). I clearly specified that in the post and therefore I can hardly have made a “mistake” on that point. Here is precisely what I wrote:

“Of course, another way to express the same result as the second example would be to take for the revenue loss due to the rate reduction 28% times the taxpayer’s historical *taxable income* rather than *gross income* Thus, (35%-28% ) x $800 = $56, the same as the gain in revenue by taking .28 times $200.”

What I am questioning is whether the TPC has actually done that in its own work. I’m asking that they clarify what they did on this point and provide much greater disclosure on a variety of other issues that are inherent in their analysis. Only the TPC can do that, because no one writing here can see beyond their conclusions.

[…] up on my post yesterday, the Tax Policy Center has posted a rebuttal of Martin Feldstein’s critique. Here’s the […]

[…] TaxVox » Blog Archive » Feldstein’s Analysis Doesn’t Refute TPC Findings, It Confirms Them: [W]e showed that any revenue-neutral tax reform that included Governor Romney’s specific tax cuts and that met his stated goal of not raising taxes on saving and investment would cut taxes for households with income above $200,000 and would therefore necessarily have to raise taxes on taxpayers below $200,000… even when we considered an unrealistically progressive way of financing the specified tax reductions, and even when we accounted for economic growth and revenue feedback…. Romney economic adviser Martin Feldstein attempts to contradict our finding… [but] confirms our central result…. [I]n Feldstein’s article, taxpayers with income between $100,000 and $200,000 would pay an average of at least $2,000 more…. […]

[…] TPC debunks Feldstein. Here’s their analysis of the myriad ways Marty went wrong. It is still the case that Gov Romney tax plan will either […]

On reflection, I thought the Romney plan was a 15% rate on capital gains and dividend taxes for families above $200,000, while making them tax free below that amount (or some variation on that). Here is the contemporaneous story http://www.washingtonpost.com/blogs/right-turn/post/romneys-tax-plan-not-obama-not-santorum-maybe-doable/2012/02/22/gIQA35EVTR_blog.html

The only way this will not bust the debt is if they assume it will “grow the economy” or if a VAT is implemented – which counts as a tax increase on the middle class. A VAT would be absolutely necessary since he would do away with AMT and inheritance taxes as well.