The Wall Street Journal and Mitt Romney’s Tax Trap

WASHINGTON, DC - JUNE 28: Republican U.S. Presidential candidate and former Massachusetts Governor Mitt Romney speaks in response to the U.S. Supreme Court ruling on the Affordable Healthcare Act with the U.S. Capitol in the background, June 28, 2012 in Washington, DC. The Supreme Court ruled that the entire law was constitutional and did not strike down any part. (Photo by Alex Wong/Getty Images)
Photo by Alex Wong/Getty Images

When Paul Gigot’s editorial page speaks, Republicans move. Today, the Wall Street Journal digs right into the Romney campaign and its refusual to issue unconvincing boilerplate about how the health care mandate penalty will be the biggest tax increase of all time. It’s brutal. Romney is “letting down” conservatives who trusted him to be electable. He’s looking a lot like “President John Kerry.” You read it and wonder why they didn’t just work in a Seamus reference. But this is the short version of the paper’s advice.

Mr. Romney should use the Supreme Court opinion as an opening to say that now that the mandate is defined as a tax for the purposes of the law, he will work to repeal it. This would let Mr. Romney show voters that Mr. Obama’s spending ambitions are so vast that they can’t be financed solely by the wealthy but will inevitably hit the middle class.

Democrats would point to the Massachusetts record, but Mr. Romney could reply that was before the Supreme Court had spoken, that he had promised Bay Staters not to raise taxes, and so now the right policy is to repeal the tax along with the rest of ObamaCare.

Accidentally, perhaps, Gigot et al point out that Romney has to struggle in a way that some modern Republican candidates haven’t. He can’t actually promise the middle class that much in the form of tax cuts.

What do I mean? In 1980, Ronald Reagan could run against Jimmy Carter and promise across-the-board cuts to the sixteen marginal tax rates. A married couple making a joint salary of $35,000, for example, had to pay a 37 percent tax on income. Reagan promised, and delivered, cuts that sent that couple into a lower bracket, paying only 21 percent. In 2000, George W. Bush promised lower marginal rates, and delivered them. Both candidates were able to promise baskets of new tax breaks and refunds, too.

Now, look back at Romney. If you’re a middle-class family, what can he promise you, specifically? Well, he has two plans. The first, explained at MittRomney.com, is a 20 percent across-the-board cut to marginal rates. The second is the Ryan plan, which Romney has endorsed. That would collapse the tax code into two lower rates – 10 and 25 percent – and pay for it by getting rid of some tax benefits. Some of those benefits result in lower middle-class tax bills. So which ones does Romney eliminate? Bob Schieffer tried to find out, three weeks ago.

SCHIEFFER: We– we know, Governor, you’ve told us, you haven’t been bashful about telling us where you want to cut taxes. When are you going to tell us where you’re going to get the revenue? Which of the deductions are you going to be willing to eliminate? Which of the tax credits are you going to– when will you going to be able to tell us that?

ROMNEY: Well, we’ll go through that process with Congress as to which of all the different deductions and exemptions are the ones–

SCHIEFFER (voice overlapping): But do you have any ideas now, like, the home mortgage interest deduction, you know, various ones?

ROMNEY: Well, Simpson-Bowles went through a process of saying how they would be able to reach a– a setting where they had actually, under their proposal even more revenue for the government with lower rates. So mathematically, it’s been proved to be possible.

Not very specific, right? Maybe, when we get to the convention, Romney will lay out how much various people would save from his new, low rates and deductions. When he does so, he’ll have to explain the cuts he makes elsewhere to pay for them. It’s just a much trickier, lower-reward game than the one Reagan and Bush could play. Tax rates are so artificially* low that you can’t run on them and still explain how you’ll pay for the welfare state that people like.

Ideally, if you’re a modern Republican presidential candidate, you get to run against a candidate who raised taxes. You can promise relief from those taxes. That’s why, from a WSJ perspective, Romney so badly needs to frame the Obamacare penalty as a Middle Class Tax Hike. There’s no other massive tax hike to run against!

*Unless we assume the payroll tax holiday will last forever