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More bug-swatting (Mitt Romney edition)

By Daniel Shaviro

Shorter Mitt Romney, from his speech today: Being a Mormon is okay, but being an atheist isn't.

Ugly intolerance fits poorly, to my mind, in a speech requesting tolerance.

Since this raises my ire, let's have some fun with Romney's tax plan, which I had previously not commented on because it seemed just too easy.

According to Romney's website, he has five main tax proposals:

1) "Make the Bush tax cuts permanent." Wow, what an original idea, Mitt! This would cost trillions of dollars and massively augment the long-term U.S. fiscal gap. No serious financing for it, of course.

2)"Lower tax rates for all Americans." I'm glad to see he isn't pandering or anything. Same comment. But these are fake tax cuts, not real ones, as indeed are any tax cuts that are unsustainable. I call it tax-shifting to the future, not tax reduction.

3. "Abolish the death tax." That Orwellian name again - it's an estate tax, not a death tax, since just dying doesn't trigger it. I have come off the fence in recent years to favor some degree of estate or inheritance taxation, largely based on economic research about people's relatively low responsiveness to taxation at the bequest margin. But again, what makes it recklessly irresponsible is the overall U.S. fiscal situation and lack of any meaningful offset.

4. "Savings incentive plan." He proposes to make interest, dividends, and capital gains tax-free for middle class families (which I believe he defines as people with up to $200,000 of income). Another unsustainable tax cut, of course. I do happen to favor progressive consumption taxation as a replacement for the income tax, so arguably this goes in a good direction from that vantage point, the lack of financing aside. But - if people can borrow deductibly (such as through their homes) while investing tax-free, all you are doing is handing them free money for zero net saving. This probably reduces national saving due to the income effect (write them a check for doing no net saving and they have more $$ to spend on consumption).

5. "Our corporate tax rate must be competitive with the rest of the world." Okay, some serious economists agree about this. But again, there is a difference between genuinely cutting tax rates, which requires a fully financed or otherwise sustainable change, and simply shifting them to the future.

I've got it - maybe Mitt is planning an Atheists Tax. After all, he said in his speech that there is no freedom without religion. With a high enough Atheists Tax, this could literally be true, and the fiscal gap addressed to boot.

Full post as published by Start Making Sense on December 06, 2007 (boomark / email).