Romney Weighs-in on the New Tax Cut Deal

In an op-ed published by USA Today, Mitt Romney offers expert analysis on why GOP should reject the so-called compromise from Obama on taxes. Not knowing the details of the plan (except that DeMint would likely filibuster it), I have withheld judgment on the this new tax deal between GOP leaders and the White House – but Romney’s words here have been a real eye-opener. He explains why the plan is short-sighted, why it would not yield any significant job growth, and why the GOP should therefore reject it.

Below is a preview and a link.

Romney: Why tax cut is a bad deal (USA Today)

Death and taxes, it is said, are life’s only two certainties. But in the wake of President Obama’s tax compromise with congressional Republicans, only death retains the status of certainty: The future for taxes has been left up in the air. And uncertainty is not a friend of investment, growth and job creation.

The deal has several key features. It reduces payroll taxes, extends unemployment benefits and keeps current tax rates intact. So far, so good. But intermixed with the benefits are considerable costs of consequence. Given the unambiguous message that the American people sent to Washington in November, it is difficult to understand how our political leaders could have reached such a disappointing agreement. The new, more conservative Congress should reach a better solution.

The deal keeps current tax rates from rising to pre-Bush era levels for two years. But in 2013, unless Congress acts again, rates will increase dramatically.

Extension temporary

Of course, delay now is better than an immediate tax hike. But because the extension is only temporary, a large portion of the investment and job growth that characteristically accompanies low taxes will be lost. When entrepreneurs and employers make decisions to start or expand an enterprise, uncertainty about tax rates translates directly into a reduced propensity to invest and to hire. With only a two-year extension, investors know that before their returns are realized, tax rates may be jacked up to the levels favored by President Obama. So while the tax deal will succeed in temporarily putting more money in the hands of consumers, it will fail to deliver its full potential for creating lasting growth.

It will also add to the deficit. In many cases, lowering taxes can actually increase government revenues. If new businesses, new investments and new hiring are spurred by the prospects of better after-tax returns, the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation. But once again, because the tax deal is temporary, a large portion of this beneficent effect is missing. What some are calling a grand compromise is not grand at all, except in its price tag. The total package will cost nearly $1 trillion, resulting in substantial new borrowing at a time when we are already drowning in red ink.

Read more at USA Today

Of course I have to include the brilliant closing line:

…But the long term health of our great engine of prosperity will remain very much in doubt. To the twin inevitabilities of death and taxes, we may now have to add persistent high unemployment.

~Nate G.