by Linda Beale
Romney’s Tax Plan–good for the wealthy, not so good for everybody else
The Tax Policy Center has done an analysis of Romney’s plan for US taxation. SeeThe Romney Plan. It doesn’t look bad at all for the wealthy. In adding at least $600 billion to the U.S. deficit by 2015, Romney would
- reduce the statutory corporate tax rate from 35% to 25% immediately (apparently with no need for offsets). Since most corporations that actually pay any federal corporate income tax–which is very few of them, even when they are quite profitable economically–already pay effective tax rates as low as 0% and typically less than 25%, this can be expected to reduce those payments even more. Lightening the burden on corporations will tend to result in higher payouts to those already overcompensated managers and higher payouts to shareholders, who tend to come from the very top of the income distribution. Net result–more money for the wealthy, less money to finance the U.S. government, and more demands for limitations to the already thin safety net.
- eliminate the US system of taxation of worldwide income in favor of a “territorial” tax system. this will be especially beneficial for multinational corporations and their owners and managers, and will tend to speed up the offshoring of US manufacturing and service jobs. A boon for the wealthiest, but a real job eliminator for the rest of us.
- reduce the maximum individual rate from 35% to 25% immediately (apparently with no need for offsets). This will benefit the wealthiest of the wealthy, who already enjoy a very compressed income bracket progression.
- Eliminate the estate tax. This will benefit the wealthiest of the wealthy, who are the only ones who pay the estate tax now.
- Retain the 15% rate for capital gains. This will benefit the wealthy, since the top of the income distribution owns most of the financial assets.
- Eliminate the capital gains tax for those with income of $200,000 or below. This is one item that will benefit a few ordinary Americans, though even here it will provide minimal tax savings for them and more savings for those in the $100-200,000 income range, who are among the most well off, though not the upper-upper crust.
Note there’s only one thing of the major changes in Romney’s list that can be said to be directed at all at the majority of taxpayers in the below $100,000 group (though it also favors those in the 100-200 thousand income). Not surprisingly, Romney’s plan would increase taxes on the poorest among us, those with $20,000 or less in annual income, by 60%.
How can that be justified? Romney says his plan is going to make the world better for inventors, job creators and entrepreneurs.
“My administration will make America the best place in the world for entrepreneurs, inventors and job creators,” Romney said at a campaign event in Davenport, Iowa, on Dec. 27. “I’ll lower and simplify taxes, especially for middle-income Americans.” Bloomberg Newsweek (link below).
Now, the wealthiest taxpayers making $1 million or more will see a 15% cut in taxes paid. That assumes, of course, that those ultra-wealthy who are mostly benefited by his version of tax “reform” fit that bill (inventors, job creators, entrepreneurs). But most of their ownership is not an investment in a company, it is acquired in secondary market trades. And most of them aren’t job creators and entreprenuers, they are just wealthy traders in the secondary market. If we really want to help job creators and entrepreneurs, we’d be funding public education from K-12 through university and we’d be reinforcing and adding to our safety net programs instead of constantly threatening to reduce or eliminate them. See Mike Kimel’s post on Pelzman at Angry Bear…
Steven Sloan, Romney Tax Plan Adds $600 Billion to Deficit, Analysis Says, Bloomberg BusinessWeek (Jan. 5, 2012);
Greg Sargent, Romney Plan Would Cut Taxes on Top 0.1% by Nearly Half a Million Dollars, Wash. Post Blog (Jan. 5, 2012).
Schoenberg, Steve Forbes, Campaigning for Rick Perry, Attacks Romney’s Capital Gains Tax Policy, Boston Globe.com (Dec. 28, 2011) (opposing the extension of zero tax rates on capital gains only to those with $200,000 or less in income).
originally published at ataxingmatter