A pro-Obama super PAC’s new TV ad portrays Mitt Romney as a past and future threat to middle-class families. The statements it makes about Romney’s business dealings and tax proposals contain some truth — but don’t tell the whole story:
- The ad says Romney is proposing “a huge new $150,000 tax cut for the wealthiest 1 percent.” But Romney’s plan would cut tax rates by 20 percent for all taxpayers, not just the wealthiest. Also, that $150,000 tax cut may be inflated because it does not include Romney’s unspecified plans to eliminate some current tax preferences — which would reduce the size of the tax cuts.
- The ad says Romney made “millions off companies that went bankrupt while workers lost promised health and retirement benefits.” It’s true Romney made money for himself and investors as head of the private equity firm Bain Capital, and that some of the companies in which Bain invested filed for bankruptcy. But it is also true that Bain invested in companies that expanded their hiring.
Romney’s Tax Plan
The ad compares Romney as a young executive and Romney as a presidential candidate — going so far as to doctor an image of young Romney with a current photo of his face to graphically illustrate that little has changed. (Our sister site, FlackCheck.org, poked fun at the quality of the Photoshopped image of Romney.) Priorities USA Action portrays Romney as making money in his youth at the expense of the working class, and now seeking to cut taxes for the very rich.
Priorities USA Action ad: Now, Romney’s proposing a huge new $150,000 tax cut for the wealthiest 1 percent, while cutting Medicare and education for us.
Viewers might come away thinking that Romney wants to cut taxes only for the very wealthy, because that’s the way it is presented in the ad. But that’s not true. And the claim that the top 1 percent will see a $150,000 tax cut may or may not be true.
Romney’s tax plan would make numerous changes, including cutting all marginal tax rates by 20 percent — which would benefit all taxpayers. Romney also would eliminate taxes on capital gains, dividends and interest for taxpayers earning less than $200,000 in adjusted gross income. In a proposal that would benefit mostly upper-income earners, Romney also would repeal the estate tax, lower the corporate tax rate, and repeal the Alternative Minimum Tax. Romney would also extend the Bush tax cuts that are due to expire at the end of the year. However, he would allow Obama’s tax changes to expire — including an expansion of the earned income tax credit for low-income workers.
In an analysis of Romney’s plan, the nonpartisan Tax Policy Center considered the impact of those changes based on current policy and found “about 11 percent of tax units would see their 2015 taxes go up an average of nearly $900 while 70 percent would get tax cuts averaging almost $4,300.” A TPC table shows that the average low-income taxpayer would see their taxes go up, because Romney would not extend Obama’s tax policies. “The tax increases reflect the expiration of three provisions enacted in 2009: the American Opportunity Tax Credit and the expansion of the earned income credit and the child credit,” the tax center says, noting, however, that Romney has said that the low- and middle-income groups will pay “no larger shares of federal taxes than they do now.”
So, Romney’s plan could result in low-income taxpayers — those earning up to $19,342 in adjusted gross income — paying more. The TPC’s analysis is necessarily incomplete; it considers only the rate reductions Romney has made public and not the tax preferences that he has said he will eliminate but hasn’t yet identified. But just looking at the rate cuts, Romney’s plan could result in tax cuts for everybody else. Middle-income taxpayers — those earning between $39,862 and $69,074 — would see an average tax cut of $810.
Of course, under Romney’s plan, the more money you make the more you could potentially see in tax cuts. The Tax Policy Center says that Romney’s plan, based on current policy, would result in a $149,997 average tax cut for the top 1 percent — which is where Priorities USA Action gets its figure of $150,000. But the center also notes that Romney’s plan would increase the tax base by making unspecified changes in “tax preferences,” such as tax credits and deductions. The center, however, could not determine what impact those revenue-raising changes would have on taxpayers, so none of the center’s figures takes that into consideration.
Tax Policy Center, March 1: Because Gov. Romney has not specified how he would increase the tax base, it is impossible to determine how the plan would affect federal tax revenues or the distribution of the tax burden.
It is possible that the tax cut for the top 1 percent would be smaller than the $150,000. The Wall Street Journal reported that Romney was overheard telling donors on April 15 that he would “eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction.” However, the Romney campaign later walked back those comments, saying that he was offering some possible options — not making policy proposals.
Romney said he found it “interesting” that groups are trying to assess the impact of his plan, admitting in a March 7 interview on CNBC that his plan “can’t be scored because those kind of details have to be worked out with Congress and we have a wide array of options.”
‘Cutting’ Medicare, Education?
As for the ad’s claim about Romney “cutting Medicare,” Priorities USA Action says it is referring to Romney’s support for Rep. Paul Ryan’s Medicare proposal in his budget plan. It cites the nonpartisan Congressional Budget Office’s analysis of that plan. Romney has praised the Ryan plan and said he would sign it, although he does have his own similar Medicare plan. But Ryan’s proposal doesn’t cut Medicare spending; it slows the growth of Medicare. And it’s speculation to say his plan would force seniors to pay more in premiums, even though Priorities USA Action points to a report by a liberal-leaning group that says it will.
In a March analysis of Ryan’s Medicare proposal, the CBO said Ryan’s plan would spend substantially less than current law or the CBO’s alternative fiscal scenario, which takes into account likely congressional actions. CBO said beneficiaries “might face higher costs,” but it could not say for certain. Republicans argue that medical costs would rise more slowly under their plan.
As for “cutting education,” Priorities USA Action points to Ryan’s budget proposals for discretionary spending in general and Pell Grants in particular.
Ryan’s plan says the Pell Grant program is on an “unsustainable path,” and it proposes “limiting the growth of financial aid and focusing it on low-income students.” Inside Higher Ed, an online site devoted to higher education news, wrote that Ryan’s plan “does not propose specific spending levels for the $40 billion program.” Ryan says his plan “maintains the maximum Pell Grant of $5,500.” However, it is possible that fewer students would be eligible for Pell Grants under Ryan’s plan, since he calls for tighter eligibility requirements.
As we have written before, it is certainly true that Ryan’s budget would require deep spending cuts. CBO’s review of Ryan’s budget showed that spending on anything other than health care entitlements and Social Security would fall to about 3.75 percent of the nation’s economy in 2050 — even though it has been at least 8 percent every year since World War II. But it is hard to know what impact Ryan’s budget would have on specific programs because the plan contains so few details.
The ad also revisits the business practices at Bain Capital, which Romney headed from 1984 to 1999.
We wrote about the private equity firm when Romney exaggerated the number of jobs created by Bain’s investments. And we wrote about Bain again when a super PAC supporting Newt Gingrich issued a mini-documentary called “King of Bain” that focused exclusively on the layoffs and benefit losses at some of the companies bought out by Bain.
The Priorities USA Action ad falls into the latter category, of course.
The group’s ad cites a New York Post article by financial journalist Josh Kosman from Feb. 19, 2011. It displays a partial quote from that article that says Romney “made a fortune from businesses he helped destroy.” In the full quote, however, Kosman did acknowledge that some companies may have flourished under Bain and Romney. The full quote says, “While I have not investigated all of Romney’s Bain investments and there may be cases where he made money and improved businesses, there’s little question he made a fortune from businesses he helped destroy.”
The Post article documents cases where businesses filed for bankruptcy — including Dade Behring, which filed for bankruptcy in August 2002. The other companies mentioned were: Stage Stores (2000), AMPAD (2000), GS Industries (2001) and Details (2003). The article does not mention Staples and Sports Authority — to name two companies — or any other company that added jobs with the financial support of Bain.
The Wall Street Journal was more thorough in its analysis of Bain’s investments under Romney. It looked at 77 businesses and found that 22 percent either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested. In many cases, the companies filed for bankruptcy after Bain sold them, and the companies were reorganized and remain in business.
The fact is there is no thorough accounting of how many jobs were created or lost under Bain’s ownership and Romney’s stewardship. There’s only anecdotal evidence that both sides have used to score political points. And, judging from this ad, that won’t stop anytime soon.
– Eugene Kiely