Mitt Romney has needed a big idea, or at least a better one than pitching himself as the turnaround artist America needs, to give resistant Republicans a reason to get on board.
And while he wins no points for originality, the former Massachusetts governor has finally embraced the one big idea U.S. conservatives love above all others – tax cuts.
His promise of a 20-per-cent cut in marginal income tax rates – dropping the top bracket to 28 per cent from 35 per cent – is now the core conceit of Mr. Romney’s candidacy as polls show him leading going into Tuesday’s GOP primaries in Michigan and Arizona.
The tax plan Mr. Romney spelled out in a major speech on Friday, before a business crowd of 1,200 gathered on the artificial turf at Detroit’s cavernous Ford Field, will turn the 2012 election into an epic battle over income inequality and wealth redistribution.
President Barack Obama is seeking an increase in the top tax bracket to 39.6 per cent and proposes taxing dividends at the same rate as earned income. Dividends and other investment income are currently taxed at 15 per cent, allowing wealthy individuals such as Mr. Romney to pay proportionally less in taxes than many middle-income earners.
The budget Mr. Obama unveiled last week also calls for the adoption of the so-called Buffett Rule as a guiding principle of U.S. tax policy, ensuring that, even after deductions, U.S. millionaires surrender at least 30 per cent of their income in taxes.
Republicans call that class warfare. And Mr. Romney, their most likely general in the November election, is now fully engaged in his party’s war on taxes.
Until this week, Mr. Romney’s tax platform was largely a carbon copy of the status quo, with the exception of his promise to eliminate capital gains taxes for households earning less than $200,000 a year.
His new plan boldly embraces the supply-side economics of Ronald Reagan and George W. Bush, both prodigious tax cutters who did not let deficits get in the way of ideology.
“By reducing the tax on the next dollar earned by all taxpayers, we encourage hard work, we encourage risk-taking and we encourage productivity by allowing Americans to keep more of what they earn,” Mr. Romney told members of the Detroit Economic Club.
Undeterred by the experiences of Mr. Reagan and Mr. Bush, Mr. Romney vowed his tax cuts would not add to the federal deficit. He pledged to balance the budget by 2016 with economic growth, the elimination of unspecified tax deductions and big spending cuts.
“I’m going to look at every single government program and ask this question: Is this so critical that it is worth borrowing money from China to pay for it?”
The Michigan-bred Mr. Romney, who has taken heat in the state for opposing the $80-billion (U.S.) Mr. Bush and Mr. Obama pumped into General Motors and Chrysler, blamed the United Auto Workers for driving the auto makers to their knees.
“The industry got in trouble because the UAW asked for too much, management gave too much and [fuel efficiency]standards hurt domestic auto makers,” Mr. Romney said, all while 200 union members chanted “Thank you, Obama” at a protest across the street.
Mr. Romney spent the week in Michigan defending his 2008 call to force GM and Chrysler into bankruptcy court to restructure their debts and renegotiate their union contracts before being allowed to secure government loan guarantees. (Instead, they entered bankruptcy only months after getting billions in direct government loans.) Mr. Romney’s bailout stand is still a tough sell in a swing state he must win on Tuesday, and again in November, if he is to make to the White House. But the son of a former Michigan governor and auto executive found sympathetic ears among the suits gathered at the stadium named for the only Detroit Three auto maker to avoid government tutelage.
“They could have gone through bankruptcy the old-fashioned way,” pension manager Brad Hyde, 45, said of GM and Chrysler. “Instead, they completely ruined the bondholders and handed over all that equity to the union.”
Mr. Hyde and his friend John Pope, a 42-year-old health insurance consultant, both insisted that Mr. Romney can win Michigan in November in spite of his bailout stand.
“I just see a lot of energy around the people who are not happy with the Obama presidency,” Mr. Pope said. “He has a record now and he has to live with it.”
And Mr. Romney now has a tax plan red-blooded Republicans can live with.