Mitt Romney is proposing an across-the-board reduction of 20 percent in income-tax rates. The current 35 percent tax rate would become 28 percent, the current 28 percent rate would become 22.4 percent, and so on. These tax cuts would come in addition to his previous proposals to eliminate capital taxes for households making less than $200,000 a year and to eliminate the estate tax. He would also eliminate the alternative minimum tax and reduce the corporate tax rate to 25 percent.
It’s a pro-growth plan. It improves incentives to work, save, and invest, and should thus modestly increase the economy’s long-run growth. It modestly improves the tax structure by reducing the tax code’s bias against saving and investment, particularly when that saving and investment is done in corporate form. Romney’s plan should also be expected to simplify the tax code, on balance. Getting rid of the estate tax and the alternative minimum tax are major steps toward simplification. But creating new income limits for various tax breaks and an income-tier structure for capital taxation are steps backward. Those income limits could also reduce the plan’s effect on growth: Depending on how they are structured, they could amount to increases in the effective marginal tax rate even as statutory marginal rates drop.
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We have two major concerns about the plan. The first is its effect on the deficit. For decades, we have favored aggressive tax reduction even in the face of concerns about the deficit, but the magnitude of today’s deficits and of tomorrow’s projected deficits are much larger than those that Ronald Reagan or George W. Bush faced upon taking office. Voters also, and therefore, seem more concerned about the issue than they were then. Romney rather vaguely promises that spending restraint and increased growth will keep these tax cuts from increasing the deficit — a promise that comes on top of vague promises to cut spending enough to reduce the deficit we already have.
Second, the plan breaks with the party’s emerging consensus that families bear a disproportionately heavy part of the tax burden. The plan would leave parents paying a slightly higher proportion of the tax burden than they already do. This was a large missed opportunity.
It is especially a missed opportunity when you consider the structure of Romney’s tax plan. Cutting the bottom tax rates from 10 and 15 percent to 8 and 12 percent accomplishes almost nothing while forgoing a lot of revenue. Someone paying the lowest rate will see his incentives improve a measly 2/90ths, or 2.2 percent. But most of the money taxed at the lowest tax rate is made by higher earners as they pass through that tax bracket. The reduction in the lowest tax rate lowers their tax bill without altering their marginal rates, and thus their incentives, at all.
A better-designed tax plan that left the lower tax rates alone could have raised the same amount of revenue as Romney’s plan while expanding the child tax credit. That alternative would not only have offered meaningful tax relief to the middle class — the political consideration that obviously drives the tax-rate structure Romney adopted — but have addressed an actual problem of the tax code.
Romney has made a constructive proposal. If he should become president, we hope that Congress will build on it by adding what it lacks: real spending cuts and tax relief for parents.
Since you're going to be accused of all sorts of things and called names, let me offer some praise for this level-headed look at the plan. I think Romney or any politician is unable to please all the people all the time, but yet so many seem to think that he should be able to. It's a good plan, much better than anything Obama has or ever will roll out. I think Romney is the only candidate looking beyond the primary and to the general election. While it would be great to see the tax code abolished and replaced with something brand new, as Obama is learning, the American public is wary of such radical change. Romney's plan is much more likely to pass than many of the pie-in-the-sky proposals that some around here are peddling.
There is no savior coming, and there is no one man that can fix everything in just one presidential cycle. We've been going down this road since the New Deal and can't just turn around on a dime. Romney clearly would be a good choice to get a course correction started and those who say ridiculous things like he is Obama-lite are displaying gross ignorance and not helping conservatism advance. If we're ever going to turn this country around it's going to take several presidents, several congresses, and also reaching out to the culture and our communities and changing them.
It is hypocritical for any Republican candidate to (rightly) criticize Obama for vastly adding to our national debt--while then proposing his own economic plan that continues to incur huge deficits to add more to the national debt.
This is not 1980 anymore and what worked for Reagan won't work today. Today we need DEBT reduction plans a lot more than we need TAX reduction plans.
The emphasis of the GOP is out of date. Today it should make balancing the budget a higher priority than cutting taxes.
The last Republican president who actually balanced the Federal budget was Nixon in 1969, despite having a Democratic Congress to work with. And that was over 40 years ago.
Romney doesn't even claim that his plan will reduce the Federal debt--because it clearly won't.
"The national debt would increase, perhaps dramatically, under the tax and spending plans of the leading Republican presidential candidates, according to an independent budget watchdog group.
"Leading the way with the most expensive plan is former House speaker Newt Gingrich, followed by former Pennsylvania sennator Rick Santorum and former Massachusetts governor Mitt Romney, says the Committee for a Responsible Federal Budget.
Totally agreed.
Maybe Romney's plan would work. But the question is whether we can afford to try his plan or not. Even Romney has to admit that his plan will have an effect on the debt increase in the short term. It's the consequence of this effect that we are worried about the whole time. And if Romney becomes the president and carries on his plan, he is risking something that is definitely going to happen for something that might not happen at all.
Any tax cut plan that is not tightly coupled to specific spending cuts is TOTALLY bogus. Romney is spouting more of the Free Lunch/Free War mantra of Bush/Obama.
Romney's a complete loser whose only chance rests on Obama's narcissistic idiocy. One of those Nitwits is going to be the 21st Century Herbert Hoover when the smoke and mirrors budget game finally blows up before 2016.
"For most of the history of income taxes in America, long-term capital gains — defined at different times as investments held for minimum periods of as little as six months and as long as 10 years — have been taxed at substantially lower rates than top ordinary income tax rates.
There was, in fact, only one time that capital gains were taxed at the same rates that were paid by people who earned their money by working. That was during the years 1988 to 1990, as a result of the Tax Reform Act of 1986 — a law championed by President Ronald Reagan."
Why is NRO continuing to beat the drums for tax subsides to parents at the expense of everyone else? Is this it's way of supporting a pro-creator's arms race? So much for not using the tax code for social engineering purposes! NRO is guilty of pure hypocrisy.
I agree, this practice always bothers me. Subsidizing families is a value judgment that families are more valuable than whatever working, single people could be purchasing with their income. Perhaps as a single person, I'm just paying off school debts so that later I can have kids. Why should I pay more now for my prudence? Why is the government prodding me into marriage and fatherhood when I'm not ready? Do they know better? Hypocrisy is right.
The only way to simplify the tax code and collect enough revenue is to treat all income the same. Now you have different types of income: regular income, carried interest, capital gaims, dividents. which are treated differently, have diferent AMTs, exemptions, deductions, etc. All serious tax reforms that simplify the tax code - such as Simpson-Bowles - tear all income the same. There is no reason for the tax code to punish hard work and favor wall-street gambling. There is no reason hedge-fund billionires to pay 15% or less taxes on their salaries/compensation. Any serious tax-reform plan that raises significant revenue - should treat all income trypes exactly the same for tax purposes. Even Reagan new that and he tried to bring closer together the tax rates for different incomes by cutting the top rate for regular income to 28% and raising the rate for gapital gains to 26%.
NR and other conservatives are bogged down in a mishmosh of bad math and fuzzy thinking when it comes to taxes. The FAIR TAX crowd are beyond help. The FLAT TAX folks mean well, but never seem to be clear on how FICA fits in.
Here in a few lines is a complete revenue neutral overhaul:
Payroll tax: 22%...11% employer and 11% employee or any other split you like. But no ceiling and no exclusion for unearned income.
Corporate income tax rate: 0%...Yes , Virginia, ZERO
Personal income tax rate: 0%.... Are you starting to see why it is REALLY flat?
Sales or VAT tax...ZERO, ZERO, ZERO.
No deductions, no exclusions, no IRS 1040, no corporate loopholes or preferences.
Only transparency and simplicity
Since it is hardly necessary to explicitly legislate ZERO rates, this is essentially a one line tax code.
I have repeatedly offered NR and other conservative entities longer, more detailed explanations of why this works. But it is hard to overcome the celebrity bias in the media----If we don't know you, you have nothing important to say.
You can check out some articles from my pitiful unknown mind at AmericanThinker.com
Romney's plan would increase the deficit by quite a lot!
The only way to simplify the tax code and collect enough revenue is to treat all income the same. Now you have different types of income: regular income, carried interest, capital gains, dividents, which are treated differently, have different AMTs, exemptions, deductions, etc. All serious tax reforms that simplify the tax code - such as Simpson-Bowles - tear all income the same. There is no reason for the tax code to punish hard work and favor Wall Street gambling. There is no reason that hedge-fund billionaires pay 15% or less in taxes on their salaries/compensation. Any serious tax-reform plan that raises significant revenue - should treat all income types exactly the same for tax purposes. Even Reagan new that and he tried to bring closer together the tax rates for different incomes by cutting the top rate for regular income to 28% and raising the rate for capital gains to 26%.
NR and other conservatives are bogged down in a mishmosh of bad math and fuzzy thinking when it comes to taxes. The FAIR TAX believers are beyond help. The FLAT TAX folks mean well, but never seem to be clear on how FICA fits in.
Here in a few lines is a complete revenue neutral overhaul:
Payroll tax: 22%...11% employer and 11% employee or any other split you like. There is no ceiling and no exclusion for unearned income.
Corporate income tax rate: 0%...Yes, Virginia, ZERO
Personal income tax rate: 0%.... Are you starting to see why it is REALLY flat?
Sales or VAT tax...ZERO, ZERO, ZERO.
No deductions, no exclusions, no IRS 1040, no corporate loopholes or preferences.
Only transparency and simplicity
Since it is hardly necessary to explicitly legislate ZERO rates, this is essentially a one line tax code.
I have repeatedly offered NR and other conservative entities longer, more detailed explanations of why this works. But it is hard to overcome the celebrity bias in the media----If we don't know you, you have nothing important to say
You can check out some articles from my pitiful unknown mind at Americanthinker.com External Link
I have the detailed calculations proving approximate revenue neutrality, suitable for even public school grads like myself.
Email me for a copy, or request that the editors request me to submit it.
I'm a single parent and own my own business and what I get in tax credits more than makes up for whatever little hike I might get, but from what I'm reading, My tax requirement would go down anyway. Romney has brought a sensible plan IF coupled with spending cuts. And he knows it. You can't reduce taxes unless you reduce spending. Right now Obama is raising taxes and raising spending and the debt. Clearly Romney is looking at the long term effects of these taxes and has made some reasonable starting suggestions. It will all depend on how well he can convince the government to cut spending.
No president controls what he gets for tax rates. That said, Romney' is plan is ok. Santorum's personal is ok - corp is insane. Newt's would not get us out of the hole we are in.
I like Romney's emphasis on building a nest egg - don't know that we want to reward people for having kids although we are at the point where we need to encourage three or four.
I expect to pay more tax under anyone's plan that makes sense. Am not part of the 1% but am part of the 2%. I don't mind if we are careful about how we spend it. I would like for everyone to pay something - just to understand that it does not grow on trees.
My understanding is that some of our manufacturing that is abroad would come home with a better corporate tax rate. I tend to support manufacture abroad for what sells abroad but would love to bring home what we buy here.
If we aren't careful (Obama re-elected) we will drive our companies to move to other countries. Transocean is no longer an American company.
Move all payroll taxes from employer to employee so we see what tax they put on our work.
Eliminate all tax on the minimum wage and you can lower minimum to $5 with more take-home pay.
Raise FICA (incl. Medicare) to 20% on all earned personal income above the minimum wage, with no cap. That would be a net tax cut for incomes under about $80,000. Also limit SS and Medicare expenditures to actuarially reasonable amounts within the total revenue attained from that 20% rate on earnings over the miinimum wage.
Tax investment income at 20%, Tax retained corporate earnings at 25%. (This ends double taxation of dividends.)
Push for constitutional amendment that limits any tax on income to 20% for individuals and 25% on corporations. It should also limit any state tax on income at 10% and prohibit unfunded federal mandates.
I agree with part of your plan Don, but it includes a huge tax increase. You can eliminate ALL corporate and personal income tax with a 22% FICA with no exclusions or ceilings. I also disagree with exempting the minimum wage component. if you work, you should pay something.
Prepare to be ...no political leaders care what ordinary people suggest. Neither do the writers and editors who earrn their living talking down to the rest of us.
The failing of the Tea Party is that it has been co-opted by the pros.
Romney’s 20% marginal rate cut provides for a $1,900 tax cut for any household making at least $69,000 in taxable income, less for those making less and more for those making more. A couple filing jointly making $250,000 would trim their tax bill by roughly $12,000 or $1,000 per month. Are these not substantial?
Meanwhile the Heritage Foundation has reported that “the percentage of people who do not pay federal income taxes, and who are not claimed as dependents by someone who does pay them, jumped from 14.8 percent in 1984 to 49.5 percent in 2009”. This is 2012, and the percentage is more than likely beyond 50. We’ve reached the tipping point where more citizens don’t pay taxes than do, and NRO is advocating more carve outs for individuals who engage or who have engaged in certain behavior. Perhaps I missed the conservative meeting where parents became the latest special interest group. Will NRO resume a more principled conservative stance after the election?
Here’s an idea for a presidential candidate. Put forth a comprehensive, visionary plan for this country that:
- reforms entitlements and takes them off the books as liabilities by transforming them into defined contribution programs
- balances the budget
- pushes a balanced budget amendment
- caps spending as a percentage of GDP
- enacts a true flat tax prior to the next election that also eliminates any marriage penalties
NRO, we have spending and structural entitlement problems, not a tax problem.
-- "but the magnitude of today’s deficits and of tomorrow’s projected deficits are much larger than those that Ronald Reagan or George W. Bush faced upon taking office." --
Uh, first, you conveniently omit that both Reagan and W. both left office with a record deficit (as did Bush's daddy). Second, Bush didn't face a deficit but a considerable surplus that Clinton left him and that silver-spoon Bush squandered on two massive unpaid-for tax cuts.
