Romney’s Tax Plan: Big Benefits for the Wealthy and Higher Deficits
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.
[...] Gleckman, H. (January 5, 2012) “Romney’s Tax Plan: Big Benefits for the Wealthy and Higher Deficits” TaxVox (Brookings Institution and the Tax Policy [...]
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[...] to cut back on federal basic needs and poverty reduction services for questionable reasons while creating a tax structure that best benefits the wealthiest [...]
[...] independent analyses have shows that the economic plans put forth by the GOP presidential candidates Mitt [...]
[...] independent analyses have shows that the economic plans put forth by the GOP presidential candidates Mitt [...]
[...] 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 [...]
[...] 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 [...]
[...] In contrast, Mitt Romney is trying to cut his own taxes by nearly half and raise taxes for many working parents and middle class [...]
[...] benefiting the wealthiest few and big corporations — while raising taxes for many working parents and middle class families. Share this:FacebookShareStumbleUponDiggPrintComments var _gaq = _gaq [...]
[...] 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: [...]
[...] dollar. Hans skatteplan beräknas vid eventuell realisering 2015 utöka budgetunderskottet med 180 miljarder [...]
[...] 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 [...]
[...] 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 [...]
[...] 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 [...]
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.
[...] Tax Policy Center dissects Romney’s economic [...]
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.
“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?
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.
[...] 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 [...]
[...] 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 [...]
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!
Is there any chance that Congress lets the Bush/Obama tax cuts expire before the economy has significantly recovered?