Romney’s Tax Plan: Big Benefits for the Wealthy and Higher Deficits

By :: January 5th, 2012

A new Tax Policy Center analysis finds that Mitt Romney’s tax plan would cut taxes for millions of households but bestow most of its benefits on those with the highest incomes. At the same time, it would significantly cut corporate taxes and add hundreds of billions of dollars to the deficit.

Compared to current law (assuming the Bush/Obama tax cuts expire as scheduled at the end of this year), Romney would cut taxes by $600 billion in 2015 alone. Relative to a world where those tax cuts remained in place, he would add about $180 billion to the deficit in that year.

In many ways, Romney’s tax plank is a fairly mainstream Republican offering. No major tax reform. Certainly no 9-9-9-like proposal to replace the current revenue system with a consumption levy. And while Romney is proposing huge tax cuts, they are more modest than those of his rivals. Newt Gingrich’s tax package, for instance, would add $1 trillion to the deficit in 2015.  Still, a $600 billion tax cut is worthy of note.

For individuals, Romney starts by making permanent both the 2001 and 2003 tax cuts and the "patch" that protects millions of middle- and upper middle-income households from the Alternative Minimum Tax. 

At the same time, he'd end President Obama’s 2009 stimulus tax reductions, including Obama’s more generous versions of the child tax credit and earned income credit—both aimed at helping low-income working families. He’d also repeal the tax increases included in the 2010 health reform law.

But Romney doesn’t stop there. He’d make capital gains, dividends, and interest income tax-free for those making less than $200,000  and repeal the estate tax (though he’d retain the gift tax).

He’d cut the corporate rate from 35 percent to 25 percent, make the research and experimentation tax credit permanent, and temporarily allow firms to continue to write-off the full cost of capital investment as soon as they acquire the property. Multinationals would get a temporary tax holiday for overseas profits they bring back to the U.S.

Compared to current law, about 44 percent of those making between $10,000 and $20,000 would get a tax cut that would average about $274. No one in that income group would pay more, but more than half would see no change in their tax bill.

Nearly all middle-income households would get a tax reduction. Among those making $50,000 to $75,000, the average tax cut would be about $1,800.

But much of the largess goes to those with the highest-incomes. Households making more than $1 million would get an average tax cut of almost $300,000, largely because, as owners of capital, they’d receive the bulk of the benefit of Romney’s very generous corporate tax reductions. While those making $1 million-plus pay about 20 percent of all federal taxes, they’d receive more than 28 percent of Romney’s tax cuts.

The story is a bit different if you start by assuming the Bush/Obama tax cuts are made permanent. Compared to that already-generous law, the average tax cut for all households shrinks from $3,500 to about $1,000 and a sizable number of low-income families would see their taxes go up. 

For instance, about 15 percent of those in the $10,000 to $20,000 income group would get an average tax cut of about $140, but 20 percent would get hit with an average tax increase of $1,000, mostly because Romney would bring back the less generous versions of those refundable child and earned income credits.

About one-third of those in $40,000 to $50,000 group would get a tax cut that would average about $400, but about one-six would face a tax increase of nearly twice as much.

Almost everyone who makes more than $1 million would get a tax cut averaging roughly $150,000. As a group, they'd receive nearly half the benefit of Romney’s tax plan. 

Romney says he’d rewrite the entire tax code--someday. But he doesn’t say how or when. Until he does, a Romney Administration’s revenue agenda would look a lot like President George W. Bush’s, just more so. 

 

25Comments

  1. David Engage America  ::  4:36 pm on January 5th, 2012:

    Is there any chance that Congress lets the Bush/Obama tax cuts expire before the economy has significantly recovered?

  2. AMTbuff  ::  6:12 pm on January 5th, 2012:

    From Romney’s document: “Whenever President Obama discusses the need for more tax revenues, Americans should remember that he already got them and spent them on a health care scheme that is itself proving to be hugely disruptive to the economy.”

    Zing.

    Pretty soon the slogan “Let’s return to Clinton tax rates” will be an argument for CUTTING taxes!

  3. Romney’s tax plan would slash revenue, reward the wealthy « Heptanews * Entertainment * Politics * Opinions * U.S. * Technology * Health * Leisure * World * Sports  ::  7:20 pm on January 5th, 2012:

    […] Gleckman, a resident fellow at the Tax Policy Center, wrote in an analysis of the center’s findings that “a Romney administration’s revenue agenda would look a lot like […]

  4. Romney’s tax plan would slash revenue, reward the wealthy – شبكة النيل الإخبارية  ::  8:38 pm on January 5th, 2012:

    […] Gleckman, a proprietor associate during a Tax Policy Center, wrote in an analysis of a center’s commentary that “a Romney administration’s income bulletin would demeanour a […]

  5. Michael Bindner  ::  11:46 pm on January 5th, 2012:

    There is still a chance that in order to get a tax repatriation holiday passed, the GOP will agree to comprehensive tax reform this year, making any tax reform or even tax policy change by the next administration unlikely at best. If Obama loses, I would expect him to let the Bush rates expire, since no one will compromise with him if he is a lame duck and I would hope he would not give them the satisfaction of extending the Bush cuts temporarily, although even if he did a temporary extension, unless the GOP picks up 13 Senate seats (with TEA Partiers running?), Romney will have to compromise with Democrats, especially if swing districts go back to the Dems this time.

  6. Gene Callahan  ::  11:56 pm on January 5th, 2012:

    “Households making more than $1 million would get an average tax cut of almost $300,000, largely because, as owners of capital, they’d receive the bulk of the benefit of Romney’s very generous corporate tax reductions.”

    A reduction of the corporate tax rate has four possible beneficiaries:
    1) the corporation’s employees
    2) the corporations customers
    3) the corporations suppliers; and
    4) the corporations shareholders.

    Standard analysis suggests that who will actually receive what share of the benefit depends on the shape of the relevant supply-and-demand curves. Which aren’t, after all, know.

    So how do you know that shareholders will get most of the benefit?

  7. Brian Dell  ::  4:40 am on January 6th, 2012:

    Agreed with Gene Callahan that the tax incidence of corporate tax cuts is not a settled question in the eyes of most economists. If the TPC has a research paper on this there would be a lot of interest in seeing it.

  8. Morning Must Reads: Incrementalist | Swampland | TIME.com  ::  8:52 am on January 6th, 2012:

    […] Tax Policy Center dissects Romney’s economic […]

  9. Zach Hensel  ::  11:14 am on January 6th, 2012:

    Is it possible to break out the contribution of corporate tax into a separate column in these tables like you did in 2008? Most folks are unaware that they pay (or effectively pay) corporate tax at all, so a table separating corporate and income taxes (and possibly dividing income taxes into payroll and 1040) would be helpful.

    Relative to current policy, Romney’s plan is a tax increase for everyone whose not rich, doesn’t own a business and doesn’t report capital gains in terms of checks written on April 15, 2014 and/or the withheld wages… it’s odd that this analysis doesn’t reflect that since that will probably be what he’s criticized for should he get the nomination.

    I think it’s crazy that Romney even released a plan now that he’s locking up the nomination… I thought he was doing a great job pretending to have detailed proposals while actually saying nothing with his 57-point, hundreds-of-page jobs plan.

  10. Romney earning almost all the backing he deserves – Oh!pinion  ::  5:02 pm on January 6th, 2012:

    […] to the policy in place today, Romney’s plan would give millionaires a $150,000 tax cut, while raising taxes on many low-income families. A sizable number of low-income families would see their taxes go up. For instance, about 15 […]

  11. Romney’s Tax Plan Gives Millionaires A $150K Tax Cut, Raises Taxes On Low-Income Families « GENERATION ME  ::  2:14 am on January 7th, 2012:

    […] to the policy in place today, Romney’s plan would give millionaires a $150,000 tax cut, while raising taxes on many low-income families: A sizable number of low-income families would see their taxes go up. For instance, about 15 […]

  12. Mitt Romney’s tax plan: tax cuts for the wealthy paid for by the rest of us | Under the Mountain Bunker  ::  10:02 am on January 7th, 2012:

    […] to the policy in place today, Romney’s plan would give millionaires a $150,000 tax cut, while raising taxes on many low-income families: A sizable number of low-income families would see their taxes go up. For instance, about 15 […]

  13. | Vi Har Räknat På Det Här | viharraknatpadethar.se  ::  5:46 pm on January 8th, 2012:

    […] dollar. Hans skatteplan beräknas vid eventuell realisering 2015 utöka budgetunderskottet med 180 miljarder […]

  14. Romney’s Tax Plan Gives Millionaires A $150K Tax Cut, Raises Taxes On Low-Income Families | _  ::  4:15 pm on January 12th, 2012:

    […] The Tax Policy Center released an analysis today showing that, contrary to Romney’s rhetoric, the overwhelming majority of the benefits under the plan would go to the wealthy. In fact, compared to the policy in place today, Romney’s plan would give millionaires a $150,000 tax cut, while raising taxes on many low-income families: […]

  15. What Romney’s Tax Returns Mean  ::  11:28 am on January 24th, 2012:

    […] benefiting the wealthiest few and big corporations — while raising taxes for many working parents and middle class families. Share this:FacebookShareStumbleUponDiggPrintComments var _gaq = _gaq […]

  16. Romney Rule vs. Buffett Rule–Entitlement versus Work Ethic  ::  12:43 pm on January 26th, 2012:

    […] In contrast, Mitt Romney is trying to cut his own taxes by nearly half and raise taxes for many working parents and middle class […]

  17. CBS News ›› Mitt Romney cum Marie Antoinette?  ::  6:49 am on February 2nd, 2012:

    […] to reorder fiscal priorities is not the middle class. It’s the very wealthy, who would get substantial tax benefits and who will usually be fine with weakened public […]

  18. Real "war on religion" one waged against the most vulnerable & people who serve them  ::  6:38 pm on February 13th, 2012:

    […] Romney, who said he’s "not concerned about the very poor," would raise taxes on parents struggling to make ends meet and make seniors, children and vulnerable families bear even more of the burden — so he can […]

  19. WeMustChange » Blog Archive » House GOP Budget Chairman Calls GOP Candidates’ Budget-Busting Economic Plans ‘Very Credible’  ::  6:58 pm on March 1st, 2012:

    […] independent analyses have shows that the economic plans put forth by the GOP presidential candidates Mitt […]

  20. House GOP Budget Chairman Calls GOP Candidates’ Budget-Busting Economic Plans ‘Very Credible’ » Meslema  ::  12:28 am on March 2nd, 2012:

    […] independent analyses have shows that the economic plans put forth by the GOP presidential candidates Mitt […]

  21. Newt Gingrich caught in race-baiting ‘Catch-22′ | The Grio  ::  4:24 pm on April 19th, 2012:

    […] to cut back on federal basic needs and poverty reduction services for questionable reasons while creating a tax structure that best benefits the wealthiest […]

  22. clarks  ::  8:44 pm on April 26th, 2012:

    Since their humble beginning back in 1825 Clarks shoes has built upon their reputation for quality by continuously revolutionizing the comfort footwear industry.From their inception,the Clarks brand has been synonymous with comfort,quality and style.Utilizing a wide range of high quality leathers and a surprisingly fresh approach to shoe design,Clarks continues to offer a broad range of fashionable shoe styles for both clarks mens shoes and clarks women shoes.Whether your looking for a casual leather flip flop,a unique slide,or comfortable casual dress shoe Clarks is sure to have the right style for you.

    As always,Clarks uk shoes continues to use only the finest leather,suede and nubuck in each and every shoe.Recently,the introduction of the unstructured series has offered consumers a number of innovative and exciting styles that utilize the Clarks Sandals exclusive Air Circulation System™.The ACS system controls the interior climate of the shoe by allowing warm air to dissipate while cool air is pulled in.Additionally,Clarks sale Unstructured shoes are thoughtfully designed to be softly cushioned and have an exceptionally lightweight flexible construction that allows you to move about more freely and naturally.

    By purchasing a pair of Clarks originals shoes you will be joining a tradition of quality,comfort and style that has stood the test of time.

  23. coast  ::  9:42 pm on April 26th, 2012:

    Coast Dresses are an excellent high street brand if you are in the market for the perfect special occasion dress.
    Whether you have a ball/prom, a black tie event, a wedding or just a special night out with the girls Coast have something suitable for all different occasions.
    Coast are one of the top brands for formal and evening occasionwear and they have several awards to prove it.The styles of Coast UK range from long maxi designs to knee length frocks to suit different evening events.
    Coast Clothes outfits are available in UK dress size 6 to 18 and a range of materials from duchess satin to silk taffeta.
    From the very start their mission has been to provide beautiful top quality Coast Dress for all the special events throughout your life,and they sure don’t disappoint.

    Coast Sale have a passion for all that is elegant,beautiful and unique.They are dedicated to creating fresh new in-house designs which enable women to look and feel glamorous.

    Coast has the collection of Coast Bridal Dresses,Coast Halter Dresses,Coast One Shoulder Dress,Coast Shoulders Dresses and Coast Strapless Dresses.

  24. sale_007  ::  2:51 am on April 27th, 2012:

    Few watch aficionados realize that the Japanese brand seiko watch has a history as old as many of its Swiss rivals. Founded in the 1880s, the company began manufacturing wrist seiko watches after World War I and quickly became an innovative leader, developing one of the world’s first seiko automatic and seiko chronograph. But perhaps Seiko’s greatest achievement came about in its race with the American brand Bulova to harness new technology, leading to the quartz watch, which revolutionized the industry and nearly drove the Swiss out of business.
    More innovations followed, including the first computer wristwatch, in 1984, and the first nonbattery seiko kinetic watch. To this list we can now add another groundbreaker: the Seiko Spring Drive mechanical movement, which is accurate to one second per day, making it approximately three times more precise than the average mechanical watch. The Spring Drive also provides an enduring seventy-two hours of power reserve (most watches offer about forty) and winds 30 percent faster than a conventional movement.
    According to seiko uk, twenty-eight years of work went into developing this movement, and only five of the company’s hundreds of watchmakers possess the requisite skills to assemble it. Regardless of its technological history, the seiko 5 is a skillfully designed watch, with graceful hands and interesting use of off-center dials.

  25. Potent, Oops, Omni-Potentate Romney, Oops, Quit Mitt and I | वसुधैव कुटुंबकम  ::  6:11 pm on July 29th, 2012:

    […] Gleckman, H. (January 5, 2012) “Romney’s Tax Plan: Big Benefits for the Wealthy and Higher Deficits” TaxVox (Brookings Institution and the Tax Policy […]