By Stacey J. Haseleu
Mitt Romney said in an interview with ABC news correspondent George Stephanopoulos on Friday, September 14, “Let me tell you, George, the fundamentals of my tax policy are these. Number one, reduce tax burdens on middle-income people. So no one can say my plan is going to raise taxes on middle-income people, because principle number one is keep the burden down on middle-income taxpayers.”
“Number two, don’t reduce the share of taxes paid by the wealthiest. The top 5% will still pay the same share of taxes they pay today,” he continued.
Romney’s comments on his tax plan come after repeated weeks of attack by both the Democratic Party and media sources criticizing the plan, stating it is mathematically impossible to reduce taxes on both the top income earners as well as the middle class (defined as those making less than $250,000 per year or less) while also reducing the deficit.
Romney’s proposed plan, which, according to the Tax Policy Center (TPC), is estimated to cost $360 billion per year beginning in 2015, would do the following:
- Maintain the Bush-era income tax rates
- Repeal estate taxes
- Lower the Corporate tax from 35% to 25%
- Repeal the Alternative Minimum Tax
- Eliminate interest, dividend, and capital gains taxes for taxpayers earning $200,000 or less
- Keep tax rates low on savings and investment
- Maintain the current progressive system (meaning those in higher income brackets pay a higher tax percentage)
Although he does not give specifics, Romney plans on paying for the tax breaks by closing tax loopholes.
During the Democratic National Convention, Vice President Joe Biden said, “Folks, Governor Romney believes it’s OK to raise taxes on middle classes by $2,000 in order to pay for another trillion-dollar tax cut for the very wealthy.”
Biden’s comments were based on an August 1, 2012 analysis of Romney’s individual, corporate, and estate tax plan conducted by the non-partisan Tax Policy Center. The report, co-authored by William G. Gale, a former staff economist in President Bush Senior’s White House and Adam Looney a senior economist in Obama’s White House, states, “Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.”
Authors Eugene Kiely and Brooks Jackson of factcheck.org conclude, “Romney is not arguing that more jobs and growth should compensate for a tax system that puts a greater burden, or a larger share of a reduced burden, on middle-income taxpayers. He’s promising that the share of taxes won’t change. He has failed to prove that’s possible. And based on available evidence, we don’t see that it is.”
As Romney has not indicated specifics of which tax loopholes would be eliminated in his plan, his campaign claims that the TPC’s report makes assumptions and does not take into consideration the economic growth that would come from reducing the corporate tax rate to 25%. Romney emphasized his “entire tax plan — including the corporate tax cuts — will be paid for through a combination of cutting spending, broadening the corporate tax base, and placing some curbs on personal tax deductions, exemptions and credits.”
Politifact.com reviewed the TPC’s study and said that it “did make assumptions, but that those assumptions tried to give the Romney campaign the benefit of the doubt.”
William McBride of the Tax Foundation, a pro-business, non-profit organization claims a 1 to 2 percent economic growth would occur by reducing the corporate tax rate; however, he also concurs with the TPC’s analysis that Romney’s plan would benefit mainly high-income earners.
The Brookings Institute and Tax Policy Center, a non-profit, public policy organization based in Washington D.C., conducted a study similar to that of the TPC. Unlike the TPC’s report, Brookings based their study solely on the components of Romney’s plan that were made available. No assumptions were made with regards to which tax loopholes would be closed. They concluded, “It is not mathematically possible to design a revenue-neutral plan that preserves current incentives for savings and investment and that does not result in a net tax cut for high-income taxpayers and a net tax increase for lower- and/or middle-income taxpayers.”
The chart below, part of Brookings Institute’s study, illustrates the projected percent of change in after-tax income after the implementation of Romney’s tax plan.
Those making less than $200,000 will clearly face an after-tax income slash of 1.2% while those making $200,000 and above would see an after-tax income increase ranging from 0.8% up to 4.1%.
The figures above not only show an increase in middle-income tax burden, but they also reflect a decrease in tax burden of the top 5%. Both factors contradict Governor Romney’s September 14th statement that the major fundamentals of his tax plan would “reduce tax burdens on middle-income people” and insure “the top 5% will still pay the same share of taxes they pay today.”