After running all the numbers under conditions that were very, very favorable to Mitt Romney’s tax plan, the nonpartisan Tax Policy Center concluded that there was simply no mathematical way for Romney to fulfill all his promises simultaneously.
Revenue neutral tax refomr means that there must be losers to offset the winners. If "the rich" get a net tax cut, then the non-rich must be lookign at a tax hike. Hence the "matematically impossible".
However! Princeton prof (and former Bush I and Bush II economist) Harvey Rosen begs to differ, noting that the TPC analysis relied on conventional "static scoring", where overall economic activity is not affected by the incentives or efficiency of the tax code. That is hardly helpful for a tax simplification and reform specifically intended to improve incentives and efficency and thereby increase growth.
Prof. Rosen presents numerous scenarios, but let's focus on one - with 3% "new" income growth, folk earning over $200k are not getting a net tax cut - their tax bill rises due to their higher income. Since they are not getting a tax cut, the lower earners needn't face a tax hike. Suddenly, the Romney miracle has become mathematically possible.
The TPC justifies their static scoring by citing sources explaining that improving tax efficiency doesn't really increase economic activity; Prof. Rosen cites other sources arguing that it does. Here is a puzzler from the TPC:
In the context of revenue-neutral tax reform, any positive growth effects are likely to be small. While the lower tax rates under the reform would strengthen incentives for employment and savings, the base broadeners would increase the portion of income that is subject to tax and have incentive effects in the opposite direction. As Brill and Viard note “lowering statutory tax rates while broadening the income tax base generally does not reduce work disincentives because it leaves the relevant effective tax rates unchanged” (Brill and Viard 2011).9 Moreover, analysis by the CBO and JCT suggest that the revenue effects arising even from rate cuts that were not accompanied by base broadening would be small (CBO 2003, 2005; JCT 2005).
Are Brill and Viard telling us that economic incentives are guided by average tax rates rather than marginal ones? Breakthrough stuff. Well, you could look it up, but I lack the time.