Mitt Romney’s Much More Important Tax Secret

by Robert S. McIntyre, CTJ Director

Almost a year ago, long before Mitt Romney became the Republican presidential nominee, CTJ was the first to figure out just how little Romney pays in federal income taxes. Based on Romney’s limited but useful financial disclosures at the time, we calculated that his 2010 effective federal tax rate was a ridiculously low 14 percent (on his reported income) — less than half of what Warren Buffett’s famous secretary pays.

Michael Scherer of Time Magazine, who’d asked us to do the analysis, posted our results on Time’s website on Oct. 3, 2011. The story got widespread attention, and led to growing demands that Romney release his actual federal income tax returns. After months of stonewalling, Romney finally released his 2010 return, which confirmed our prediction that he’d paid only 14 percent in federal income taxes.

Since then, Romney has adamantly refused to release any of his earlier tax returns, causing speculation that he has something even more damaging to hide (and keeping CTJ busy fielding media questions about what such things might be).

Looking at Romney’s past tax returns could provide some valuable information, not just about Romney himself but also about the egregious loopholes that allow him to pay so little.

But Romney is hiding a much more important tax secret: the truth about how the tax plan he’s campaigning on would affect the rest of us.

So far, all Romney has told us about his individual income tax plan is the following: First, he would extend all of the Bush tax cuts and permanently repeal the Alternative Minimum Tax. Second, he would make interest, dividends and capital gains tax-exempt for people with other income up to certain levels ($200,000 for couples). Third, he would reduce all federal personal income tax rates by a fifth (so, for example, the top income tax rate would fall to 28 percent). Fourth, well, the fourth item is the big secret.

Romney says that he would partially pay for the $8 trillion ten-year cost of the income tax cuts he proposes  by getting rid of many personal tax breaks. But he refuses to specify even a single one of them! To be sure, at one point, he suggested he might curb the mortgage interest deduction for vacation homes, but he quickly backed off even that tiny reform.

How can voters calculate even roughly how they would be affected by Romney’s tax plan without knowing the crucial details of which tax breaks he wants to eliminate? Will he crack down on tax breaks for wealthy investors like himself? Well, no, he’s ruled that out. Will he eliminate deductions for mortgage interest and property taxes? Tax credits for middle- and low-income families with children? The tax exemption for employer-paid health insurance? Tax deductions for extraordinary medical expenses? Who knows?

It’s all well and good that analysts with high-powered tax models (like ITEP’s) can calculate that even if Romney eliminated all non-investment-related personal tax breaks, his gargantuan tax plan can’t possibly break even — and thus will mean huge increases in budget deficits. But American voters also deserve to know whether Romney plans to raise taxes on them, and by how much.

Barring a speech tonight that answers these questions, that’s the crucial tax secret that the public and the media should be clamoring for Romney to reveal.