Mitt Romney's campaign has been struggling for a while with a basic question—how can he cut taxes for the rich without either raising taxes on the middle class or making the budget deficit much larger. We've seen studies indicating that this is possible if you define "middle class" as only those earning less than $100,000 but most of the time Romney has stuck with the political convention of saying that "middle class" ends in the $200-250,000 range.
George Stephanopoulous asked him about this and the answer only makes sense if you assume he's totally ditching concern about the budget deficit:
MITT ROMNEY: Well, I said that there are five different studies that point out that we can get to a balanced budget without raising taxes on middle income people. Let me tell you, George, the fundamentals of my tax policy are these. Number one, reduce tax burdens on middle-income people. So no one can say my plan is going to raise taxes on middle-income people, because principle number one is keep the burden down on middle-income taxpayers.
GEORGE STEPHANOPOULOS: Is $100,000 middle income?
MITT ROMNEY: No, middle income is $200,000 to $250,000 and less. So number one, don’t reduce– or excuse me, don’t raise taxes on middle-income people, lower them. Number two, don’t reduce the share of taxes paid by the wealthiest. The top 5% will still pay the same share of taxes they pay today. That’s principle one, principle two. Principle three is create incentives for growth, make it easier for businesses to start and to add jobs. And finally, simplify the code, make it easier for people to pay their taxes than the way they have to now.
The way this works is that if you're cutting middle class taxes while holding the tax share of the wealthy constant, you need to also cut taxes on the rich. Basically a gigantic across-the-board tax cut rather than the kind of revenue-neutral base-broadening reform that Romney's campaign has tended to allude to. A huge deficit-increasing tax cut is what Ronald Reagan brought us, it's what Bob Dole and John McCain ran on, and it's what George W. Bush did. So I don't think it should surprise us to see that Romney is headed in that direction. And given the state of the economy, this form of stimulus focused on tax cuts and defense spending might be a good idea. The only problem is that Romney won't publicly embrace his inner closet Keynesian and make the case. Instead he's somehow suggesting that he can cut taxes on everyone and still have the same amount of tax revenue, which is bizarre.