Obama Misrepresents My Study on Romney Taxes, Princeton Economist Says

Princeton economist Harvey Rosen says that President Barack Obama is misrepresenting what his study says about Mitt Romney's tax plan.

One of President Obama's main reelection messages has been that Romney, his Republican rival, would raise taxes on the middle class. In last week's debate, Romney criticized Obama for basing his conclusions entirely upon a single study conducted by Brooking Institution's Tax Policy Center (TPC).

"Now, you cite a study. There are six other studies that looked at the study you describe and say it's completely wrong," Romney said.

On Sunday, though, the Obama campaign said two studies by economists Martin Feldstein and Harvey Rosen reach the same conclusion.

"Even the studies that Romney has cited to claim his plan adds up still show he would need to raise middle class taxes. In fact, Harvard economist Martin Feldstein and Princeton economist Harvey Rosen both concede that paying for Romney's tax cuts would require large tax increases on families making between $100,000 and $200,000," an Obama campaign press release said Sunday.

However, Rosen, the John L. Weinberg Professor of Economics and Business Policy, says that Obama is misrepresenting what the study says.

"I can't tell exactly how the Obama campaign reached that characterization of my work," Rosen wrote in an email to The Weekly Standard. "It might be that they assume that Governor Romney wants to keep the taxes from the Affordable Care Act in place, despite the fact that the Governor has called for its complete repeal."

Romney's tax plan is to cut all tax rates by 20 percent and eliminate a number of deductions and credits to make the plan revenue neutral. In other words, the amount of money raised from closing loopholes would pay for the rate cuts, and the same amount of revenue would go to the U.S. treasury.

The Obama campaign has been arguing, based up the TPC report, that the middle class would end up having to pay more in taxes because without the deductions and credits they would no longer be able to take advantage of on their tax returns they would pay more, even with the rate cut.

"The main conclusion of my study is that under plausible assumptions, a proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on taxpayers with incomes above $200,000 about the same. That is, an increase in the tax burden on lower and middle income individuals is not required in order to make the overall plan revenue neutral," Rosen explained.

The authors wrote an update in August to clarify parts of the study that were being taken out of context by the Obama campaign.

The study did not say that Romney wants to raise taxes on the middle class, nor did it say that it is mathematically impossible to have a revenue neutral tax plan that reduces rates and does not increase the tax burden on middle class taxpayers, the update says.

Rather, the study argues that the Romney plan cannot achieve all five of its goals without increasing the tax burden on the middle class. The five goals identified by the report include cutting marginal tax rates by 20 percent, increasing incentives for saving and investment (cutting taxes on dividends and capital gains), eliminating the alternative minimum tax, eliminating the estate tax, and maintaining revenue neutrality.