Apparently, Mitt Romney needs a “big idea.” At least that’s what The Wall Street Journal says: “Mr. Romney’s 59 economic proposals are fine but forgettable little ideas. He needs a big idea.”
The Weekly Standard’s Fred Barnes thinks the same thing: “Mitt Romney needs a big idea. … Unless he changes his message, Romney will be lucky to win the GOP nomination. And he’ll fail to inspire an enthusiastic following in the general election against Obama.”
What might that “big idea” be? The obvious one is tax reform, a winning issue for Republicans for more than 30 years. Here’s the current Romney tax plan:
1. Maintain current tax rates on personal income.
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 from “worldwide” to “territorial” system for corporate taxation.
Now, none of those ideas are bad ones. They just fall short of the comprehensive tax reform America needs to boost growth. Clearly, Romney has to flesh out idea #5 and specify just what sort of “overhaul” he wants. And he’s slowly, ever so slowly, doing just that. In the first South Carolina debate, for instance, Fox’s Bret Baier asked each of the GOP candidates what’s “the highest federal income tax any American should have to pay?” Romney’s answer:
I would like 25 percent, but right now it’s at 35, so people better pay what is legally required. But ultimately let’s get it down to as low as we possibly can, if it’s 20, if it’s 25 but paying more than 25 percent, I think, is taking too much out of our pockets.
A top marginal tax rate of 25 percent would be the lowest since 1931. It also happens to be the top tax rate specified in Paul Ryan’s “Roadmap for America.” But to make that 25 percent number fiscally plausible, Romney also needs to specify what tax breaks he would scale back or eliminate to broaden the tax base. In a New York Times op-ed yesterday, Romney economic adviser Greg Mankiw highlights the mortgage interest deduction as one that should be eliminated. Romney could also listen to Mankiw and advocate for some sort of progressive consumption tax.
But there are some problems with this approach:
1. Tax reform isn’t necessarily a big political winner. Herman Cain’s 9-9-9 plan was a hit with GOP voters. Rick Perry’s 20 percent flat tax? Not so much. And Newt Gingrich’s surge has happened even though he doesn’t dwell on his 15 percent flat tax.
2. Tax reform might not actually cut taxes for the middle class, especially once you start scaling back tax breaks. Some versions of tax reform might actually raise taxes for middle-income voters. Also, nearly half of Americans are not even paying income tax.
3. Romney would have to defend cutting taxes for “the rich.” And so far that’s not proven to be his strong suit. For instance, he only wants to cut capital gains tax for those making under $200,000 because, he says, “the wealthy are doing just fine.” Well, if that’s true, then why do they need a lower income tax rate? Cutting taxes is about boosting growth and incomes and jobs, not just keeping more of what you make.
More than a Big Idea, Romney needs a Big Argument that explains why America is in economic and fiscal trouble and how his plan fixes those problems. Barack Obama has an argument: 30 years of slashing taxes for the rich and cutting regulations resulted in rising income inequality and an unstable economy with too little public investment. Time for managed capitalism (more like state capitalism, really) and more government.
Romney’s Big Argument, by contrast, could center around how crony capitalism created the housing and financial crisis (via Too Big To Fail and pro-housing policy/Fannie-Freddie) and saps growth by directing capital (via all manner of tax breaks and regulation) toward unproductive areas of the economy. Oh, and it’s bankrupting us. Time for free-market capitalism and less government. That could be a winning message. Romney’s been hinting at it lately, such as in the final South Carolina debate. But it needs to be a consistent theme, not just a talking point.