“In the long run, Mitt Romney will pursue a conservative overhaul of the tax system that includes lower and flatter rates on a broader tax base. The approach taken by the Bowles-Simpson Commission is a good starting point for the discussion.” That’s what the Romney campaign said in the “plan for jobs and economic growth” it released in September. One question his well-wishers have been pondering recently is whether the time has come for Romney to provide more details about this long-run plan.
Many conservatives, especially at the Wall Street Journal, have urged Romney to come out for a conventionally supply-side plan that brings the top tax rate down to the neighborhood of 25 percent. It is obvious why Romney has hesitated to take this step: He fears being labeled as pro-rich, especially since he is so rich himself, and being accused of widening the deficit.
But as is often the case with supply-side reforms, it’s the action on the margin that matters. Because he has already said he favors extending the Bush tax rates, cutting the corporate tax rate, and abolishing the estate tax, Romney is bound to be accused of succoring the rich and expanding the deficit regardless of what else he says. So announcing his support for additional tax cuts may not have large extra political costs. And there would be an upside. A tax-reform proposal could help Romney solidify conservative support in the primaries and the general election. It could also give him an economic-policy message more attractive than “Let’s keep George W. Bush’s policies.”
But though Romney should not let political concerns keep him from proposing a tax reform that benefits rich people, he should take care that his reform plan has more to it than that. Conservative tax policy, as the editors of National Review note today, has rarely been politically successful unless it had “some direct, tangible benefit to offer middle-class families.” The editorial points out that Rick Santorum, Newt Gingrich, and Rick Perry have all advocated measures that would lighten the tax burden especially for middle-class parents, and urges Romney to join the bandwagon by coming out for enlarging the child credit that the Contract with America introduced to American tax policy.
Cutting marginal tax rates for high earners, expanding the child credit, and adopting various other tax cuts would increase the deficit. But there are many ways to offset this effect. Capping the deductions for mortgage interest and state and local taxes would be one way, lowering the thresholds at which the top tax brackets begin another. While Romney may not wish to go into this level of detail even if he presents more information about his preferred tax reform, it may be wise to provide a few illustrative examples of how a reformed tax code could raise the desired level of revenue.
Romney will be speaking at the Economic Club of Detroit, a traditional venue for high-profile policy announcements, at the end of the week. It would be a fitting time for him to say some more about the tax reform he has been hinting at.
Every serious tax reform proposal, including Bowles-Simpson, includes simplifying the tax system by treating all income exactly the same. Any fair tax code should not penalize hard work and favor wall street gambling. Indeed when income taxes were originally introduced in the USA all income was taxed under the same progressive tax rates and only incomes of over $1.2M (in 2012 $) were taxed. The problem is that now the super rich pay much less in taxes because their income comes mostly from carried interest (salaries for money managers), dividents and capital gains. And since any reasonable tax reform should not penalize hard work, the rich will need to pay more taxes (as income from hard work will be taxed at the same marginal rates as income from wall street gambling and managing other people's money). So the super rich - and the Republicans which they have bought - oppose any Bowles-Simpson like reform. There is not a single Republican currently in Congress that will vote for Bowles-Simpson because it will effectively double the tax rate of the super rich (carried interest, dividents and capital gains). The super rich don't like paying taxes and have bought Congress to make sure they don't.
Reply to this commentLinkReport AbuseYou're a liar.
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Reply to this commentLinkReport AbusePlease provide a link that shows what the top 0.01% pay in taxes - or at least the top 0.1%. It is clear that the people making $300-500K - or the 1% - pay 30% taxes. The problem is that the top 0.01% (Romney, Buffet, Soros) pay about 10-15% and only on the portion of their income they cannot hide. Romnay has amassed $100M government sponsored 100% tax free retirement plan - how do you do that when regular folk have limits on their contributions. Also Romney has transfered $100M to his sons tax free - regular folk cannot do this!
Reply to this commentLinkReport AbuseIn general I'd say the R's have been more supportive of Bowles-Simpson than the D's.
Reply to this commentLinkReport AbuseOf course Republicans would be more supportive of Simpson-Bowles as it would made our tax code MUCH more regressive. Have you seen the gas tax and consumption tax components of SB.
How can ANY politician support a tax reform which would exacerbate income inequality in an already very unequal USA?
Also, please recall how Obama's poll numbers plunged when he flirted with SB.
Reply to this commentLinkReport Abusealan borrows 02/20/12 18:30
Reply to this commentLinkReport AbuseHere is a very simple and fair tax code without any loopholes:
All income (regardless what is the source because work should not be discouraged in favor of wall street gambling) is taxed at the same low marginal rates - 4 marginal rates:
0-$100K: 15%
$100K-$1M: 20%
$1M-$10M: 25%
$10M++++: 30%
$10K - personal exemption (this is child-supporting because the more children you have - the more exemptions you can claim)
No deductions whatsoever is the simplest and the best (even for charity).
Business tax - flat something between 20 and 25% with no tax preferences and incentives for anyone.
Seems to me it's the Fed Reserve that makes the policies that favor speculative gambling -- by greasing it with public guarantees.
Dismantle the bad government you voted for instead of demonizing the citizens who (oddly!) respond to the incentives presented.
Reply to this commentLinkReport AbuseYeah, but...
Isn't "conservative" support for Romney non-existent now that everyone is aware of the anti-religious-freedom contraception mandate he instituted in Massachusetts? No NRO contributors could still vote for him, right?
Reply to this commentLinkReport AbuseOh, you mean that bill that Romney vetoed?
Reply to this commentLinkReport AbusePassing of the Buffet Rule Legislation will greatly facilitate a meaningful tax reform and everyone should push for its passing. In fact it should be 100% clear that meaningful tax reform cannot be enacted if such legislation is not passed. The super rich love the current tax system, which allows them to hide most of their income in tax shelters and loopholes, and to pay 15% or less in taxes on the income they can't hide. They (and the politicians they control) will be fighting to the death any meaningful tax reform that will prevent them from avoiding paying taxes (as does the current tax law). Only passing of the Buffet Rule legislation - which is very simple and effectively closes most tax loopholes - will give any incentive to the super rich (who have bought most, if not all, USA politicians) to support a meaningful tax reform.
Reply to this commentLinkReport AbuseI'll be counting the number of copy-and-paste re-posts I see for this paragraph in coming days.
Reply to this commentLinkReport AbuseAfter reading today that Alan Iverson is broke despite earning $150 million during his NBA career I propose the Iverson Rule to go along with the Buffett Rule: There is no revenue so great it can't be outspent. Obama's having more success implementing the former than the latter.
Reply to this commentLinkReport AbuseSir, the most polite thought I had after reading that drivel is you are an ignorant nincompoop.
"The super rich love the current tax system, which allows them to hide most of their income in tax shelters and loopholes, and to pay 15% or less in taxes on the income they can't hide. "
Do you have any clue how many hard working middle class couples at retirement age are now relying on dividend income to pay their bills? Of course you don't, because - in your small, insulated little mind - anyone who's relying on their savings and not relying on government handouts must be a super-rich fat cat.
Reply to this commentLinkReport AbuseExcellent idea: we'll make it 15% for everyone. No exceptions. And limit federal spending to the same rate of GDP. Yee-ha, watch the economy boom!
(There's another post here proposing 10%. Do I hear 9%?)
Reply to this commentLinkReport AbuseDid Kevin Williamson sign off on the editorial?
Until I hear otherwise, I'm going to assume no.
Until I hear otherwise, I'm going to laugh in the face of another "editorial" supporting GOP-approved social engineering via the tax code.
Reply to this commentLinkReport AbuseIf he's talking a FLAT tax with no deductions and no IRS, then we're talking, since he's not, he's just tinkering around the edges like a good little center-right milquetoast "conservative".
Reply to this commentLinkReport AbuseI know Newt's program doesn't meet your criteria but it is an optional flat tax. Any optional tax keeps the current tax code and then adds a new option. Therefore, we still have the IRS.
I have a serious question on Newt's tax plan that I haven't heard addressed. The static analysis of Newt's plan show that it reduces revenue by $1.3T and thereby doubles the deficit to $2.6T in the current tax year. Economic growth will help but no one has released a dynamic scoring. There is a limit to realistic growth that will never make up the extra deficit in the short term.
Chris Wallace asked Newt about this on FNS and Newt did some hand waiving and talked about new royalty revenue for drill, baby, drill on Federal lands. His goal is to drive to gasoline to $2.50/gallon.
There is no way oil royalties could ever come close to making up this shortfall. 2008 was a record year for oil imports. We spent $800B for those imports and oil price varied between $50 and $145 -peaking in the summer. Our imports counted for about 50% of oil consumption. As you can see there is no calculus to generate significant royalties AND keep gasoline at $2.50/gallon.
Reply to this commentLinkReport AbuseOnly one candidate proposed a flat tax, and the smart people ran him out of town 'cause he talked funny.
Most "conservatives" today are milquetoast.
Reply to this commentLinkReport Abuse"In the long run, Mitt Romney will pursue a conservative overhaul of the tax system that includes lower and flatter rates on a broader tax base."
In the fairly short term, the country will be bankrupt and it won't what matter tinkering Mitt was planning on doing long term.
Reply to this commentLinkReport AbuseNice, round, flat-tax rate of 10%. No deductions. No credits. No exemptions. Just 10%.
Ehhughh....
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