Hint $\ $ When debugging proofs on abstract objects, the error may become simpler to spot after specializing to more concrete objects. The symbols $\rm\:x,y,z\:$ denote abstract numbers, so let's specialize them to their concrete number values: $\rm\:x = 5,\: y=7,\: z = 6,\:$ yielding this "proof"
$$\begin{eqnarray}
5 + 7 &=&\: 2\cdot 6 \\
5- 2\cdot 6 &=&\: -7 \\
\cdots\ &=&\ \cdots \\
(5-6)^2\! &=&\: (7-6)^2 \\
\color{#c00}{5-6}\ \ \:&=&\:\ \ \color{#c00}{7-6}\:
\end{eqnarray}$$
Now we can spot which inference is incorrect by determining the first $\rm\color{#c00}{false\ equation}$ above. If equation number $\rm\: n\!+\!1\:$ is false then the inference from equation $\rm\:n\:$ to $\rm\:n\!+\!1\:$ is incorrect. Doing so we find that last equation being false, which reveals the culprit inference $\,(-1)^2 = 1^2\color{#c00}{\Rightarrow\, -1 = 1}$
Analogous methods prove helpful generally: when studying abstract objects and something is not clear, look at concrete specializations to gain further insight on the general case.