So far I have covered Herman Cain's "999" Plan (Part One-Part Two), Rick Perry's Alternative Maximum Tax, and Steve Forbes' Flat Tax (which Perry was originally believed to be adopting); Now, it's Romney's turn to go under my tax microscope.
Romney's "59-point plan" (PDF) isn't just a tax code proposal, but a series of policy changes covering taxes, business regulations, foreign trade, energy policy, China policy, immigration, employment retraining, and the federal budget deficit. It is, by far, the lengthiest plan any of the current Presidential contenders has presented (and, undoubtedly, its length is the major reason it hasn't recieved as much media attention as the other plans).
One should notice very quickly that this isn't really a "new" plan; it's a compendium of proposals put forth by others, which Mitt has packaged together.
For the sake of brevity, I'll group together a number of points into single units, and rate each unit on a "Good-Bad-Ugly" scale.
1. Maintain current tax rates on personal incomeThis set of points reflects Romney's political pragmatism: He won't challenge Democrats on lowering tax rates for individuals, and will preserve current tax rates on investments for those who earn more than $200,000 (or, as President Obama calls them, "millionaires and billionaires"), while going for the low-hanging fruit of permanently eliminating the estate tax and taxes on investments for those earning less than $200,000 (in other words, tax-privileging senior citizens' accumulated wealth and retirement savings).
2. Maintain current tax rates on interest, dividends, and capital gains
3. Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains
4. Eliminate the death tax
5. Pursue a conservative overhaul of the tax system over the long term that includes lower, flatter rates on a broader base
6. Reduce corporate income tax rate to 25 percent
7. Pursue transition from “worldwide” to “territorial” system for corporate taxation
Being a flat tax advocate, I'm slightly disconcerted to see a low priority placed on instituting flat tax. As I stated in a previous post, there is already broad bipartisan support for flat tax; it's a major improvement which could be achieved quickly.
Likewise, proposing to merely reduce the corporate income tax to 25%, instead of eliminating it altogether, is another pragmatic move- Democrats would strenuously resist eliminating the corporate income tax, despite the fact that it is a double-tax.
The last point- "territorial taxation"- refers to a plan to permanently repatriate overseas profits. On the Republican side of the aisle, this is non-controversial; some Democrats could possibly be convinced to see the wisdom of re-injecting repatriated funds into the US. I like the idea of phrasing it as "territorial taxation"- this means a permanent change to the taxation of foreign profits, rather than a "holiday" for repatriation.
All in all, I'd have to describe this as "Good" on the Good-Bad-Ugly scale.
8. Repeal ObamacareI doubt I need to say anything on the subject of repealing Obamacare- it's a subject which has been covered in wonderful detail. I'll also avoid the "Obamneycare" quips at this point (side note: I still maintain that Tim Pawlenty started using the term "Obamneycare" after I made that joke on Twitter).
9. Repeal Dodd-Frank and replace with streamlined, modern regulatory framework
10. Amend Sarbanes-Oxley to relieve mid-size companies from onerous requirements
11. Ensure that environmental laws properly account for cost in regulatory process
12. Provide multi-year lead times before companies must come into compliance with onerous new environmental regulations
13. Initiate review and elimination of all Obama-era regulations that unduly burden the economy
14. Impose a regulatory cap of zero dollars on all federal agencies
15. Require congressional approval of all new “major” regulations
16. Reform legal liability system to prevent spurious litigation
Repealing Dodd-Frank and amending Sarbanes-Oxley are unequivocally positive steps.
The part about this section which disturbs me is the repeated use of the "cost" phrasing- "unduly burden the economy", "cap of zero dollars", etc. This implies that there are regulations which cost nothing (I'd love to see an example of one); it also implies that regulating free enterprises is justifiable if the cost of said regulations is nil- again assuming that any regulation carries no cost.
It also produces another misnomer: That there is an accurate way to measure the costs to a particular business of a given regulation. All free-marketers understand that regulations cost money, and we can produce reasonable estimates to demonstrate this principle. It is, however, a principle; promising to implement it as a policy, which requires reliable calculations, could become a minefield.
Consider this: Whose calculations would be considered valid...? The above-mentioned Obamacare debate has centered upon conflicting calculations of cost- one agency claims Obamacare will save money, another group claims it will cost more money. We all know this tug-of-war by heart.
It's simpler and easier to just take a chainsaw to regulations. Additionally, the plan states that once Obama-era regulations are eliminated, the cutting will end- implying that no previous administration created burdensome regulations which could also be axed. Because of these factors, I have to rate this section "Bad".
17. Implement agreements with Colombia, Panama, and South KoreaThere really isn't much to say in this section. Romney's plan literature (linked above) makes a very valid argument that President Obama has had little interest in developing foreign trade. While the free-marketer in me says the government should stay out of trade, another part of me says that using diplomatic means to strike deals beneficial to American businesses isn't a bad thing. On the whole, this is "Good".
18. Reinstate the president’s Trade Promotion Authority
19. Complete negotiations for the Trans-Pacifc Partnership
20. Pursue new trade agreements with nations committed to free enterprise and open markets
21. Create the Reagan Economic Zone
22. Increase CBP resources to prevent the illegal entry of goods into our marketIt's no secret that China is doing very well economically- and some of that success is due to cheating.
23. Increase USTR resources to pursue and support litigation against unfair trade practices
24. Use unilateral and multilateral punitive measures to deter unfair Chinese practices
25. Designate China a currency manipulator and impose countervailing duties
26. Discontinue U.S. government procurement from China until China commits to GPA
On the first point: Romney proposes devoting additional Customs and Border Patrol personnel to searching incoming shipments of goods for counterfeit items. One can see right away how this could spiral into absurdity: CBP wants more resources to search ships coming from China, so Chinese counterfeiters ship to other countries, who then ship here. CBP then needs even more personnel to search ships from those countries. Chinese counterfeiters cease shipping to those countries and ship to other countries instead. CBP needs even more personnel to now search every ship from every country.
There is a basic rule of black market economics: A black market can only exist when a particular good or service is illegal, heavily taxed, or regulated. Here in New York, for example, there is a well-developed "black market" for cigarettes: We have such high taxes on cigarettes that people go to Native American reservations to buy tax-free smokes. Cutting the tax would kill this black market.
On the other hand, we know from the prohibition of alcohol that no amount of enforcement will kill a black market. In fact, stricter enforcement generally causes black markets to grow (the black market for recreational drugs, for instance).
The solution for the black market in Chinese-produced counterfeit goods, then, is to dramatically reduce the cost of doing business in the United States. Cut taxes, cut regulations, and enable businesses to sell their products cheaper, and there would be no profit in making counterfeits.
Add to this Romney's proposals in points number 24 through 26- which would take first steps toward an open trade war with China- and I have to call this section "Ugly".
EPA and Energy:
27. Establish fxed timetables for all resource development approvalsAll of this is sound energy policy. The basic point made by these proposals is a well-known and sound one: The federal government is the single biggest roadblock to energy security and self-sufficiency. Federal over-regulation and manipulation limit oil and natural gas production; federal regulations limit the development of nuclear power (including the federal mandate which prohibits the building of newer, cleaner thorium-based nuclear reactors), and the federal government wastes taxpayer money on unproductive "green" energy programs. I rate this section "Good".
28. Create one-stop shop to streamline permitting process for approval of common activities
29. Implement fast-track procedures for companies with established safety records to conduct pre-approved activities in pre-approved areas
30. Amend Clean Air Act to exclude carbon dioxide from its purview
31. Expand NRC capabilities for approval of additional nuclear reactor designs
32. Streamline NRC processes to ensure that licensing decisions for reactors on or adjacent to approved sites, using approved designs, are complete within two years
33. Conduct comprehensive survey of America’s energy reserves
34. Open America’s energy reserves for development
35. Expand opportunities for U.S. resource developers to forge partnerships with neighboring countries
36. Support construction of pipelines to bring Canadian oil to the United States
37. Prevent overregulation of shale gas development and extraction
38. Concentrate alternative energy funding on basic research
39. Utilize long-term, apolitical funding mechanisms like ARPA-E for basic research
40. Appoint to the NLRB experienced individuals with respect for the rule of lawAgain, nothing new, but all solid proposals. I can safely assume most people reading this blog are fully aware of NLRB's treatment of Boeing, and the use of union dues to almost exclusively support Democrat political campaigns. This solidly rates as "Good".
41. Amend NLRA to explicitly protect the right of business owners to allocate their capital as they see fit
42. Amend NLRA to guarantee the secret ballot in every union certifcation election
43. Amend NLRA to guarantee that all pre-election campaigns last at least one month
44. Support states in pursuing Right-to-Work laws
45. Prohibit the use for political purposes of funds automatically deducted from worker paychecks
46. Reverse executive orders issued by President Obama that tilt the playing field toward organized labor
47. Eliminate redundancy in federal retraining programs by consolidating programs and funding streams, centering as much activity as possible in a single agencyThis section, in my opinion, makes a mountain out of a molehill: Government retraining programs put very few people back to work. They are a perfect example of a feel-good program- a waste of money which "feels" productive but really isn't.
48. Give states authority to manage retraining programs by block granting federal funds
49. Facilitate the creation of Personal Reemployment Accounts
50. Encourage greater private sector involvement in retraining programs
To illustrate why, consider this hypothetical: You are an employer looking to hire a mechanic. You have two candidates, one with 10 years' experience as a mechanic, and another who just recently graduated from trade school and has never held a job as a mechanic. Which candidate do you hire? Obviously, you would hire the more experienced applicant.
This is a fatal flaw of retraining programs, which cannot be resolved by any amount of "restructuring". For this reason, I have to rate this section "Ugly".
51. Raise visa caps for highly skilled workersWhile I'm all for increasing legal immigration, this proposal would target for immigration those people with advanced skills over all others. As I explained above, there is already a shortage of employment opportunities for skilled workers; the target of this proposal would just add to that problem. I have to call this section "Bad".
52. Grant permanent residency to eligible graduates with advanced degrees in math, science, and engineering
53. Immediately cut non-security discretionary spending by 5 percentA few points:
54. Reform and restructure Medicaid as block grant to states
55. Align wages and benefts of government workers with market rates
56. Reduce federal workforce by 10 percent via attrition
57. Cap federal spending at 20 percent of GDP
58. Undertake fundamental restructuring of government programs and services
59. Pursue a Balanced Budget Amendment
53) "Non-security discretionary spending" refers to about 15% of the total federal budget. A 5% cut of this tiny fraction amounts to practically nothing.
54) Block granting Medicaid funds to the states is a great idea- but not an original one. The key to making it work, though, is to block grant and cut the funds. Romney doesn't propose the "cut" part of that equation.
57) 20% of GDP is still higher than the 18%-ish typically collected by the federal government. It is, however, a cap, which is good; but Romney doesn't provide any clue as to what he'd cut to get below the cap.
58) This statement is so vague as to be worthless. Period.
59) This is a tricky subject, and I'm glad Romney left it for last. The basic concept of a balanced budget amendment- the idea of a Constitutional limit on spending- is a good theory. But as always, "The devil's in the details". Most proposals for a BBA have been written in such a way as to guarantee the involvement of the courts in the budgeting process, which could get very ugly. On the other hand, a very simple amendment- something to the effect of "Congress shall not spend more in the current year than the amount collected in revenue the previous year without a 2/3 majority of both houses"- is too blunt to pass through the Amendment process.
Given all of these issues, I have to rate this section "Bad".
So there you have it: Mitt Romney's 59-Point Plan: The Good, The Bad, and The Ugly.