Tag Archives: tax system

Romney Would Pay Almost Nothing in Taxes Under the Gingrich Plan

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If the Gingrich tax proposals had been in place in 2010, Romney would have paid almost nothing in Federal taxes despite a gross income of $20.9 million that year.  An analysis of his recently released tax returns by Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, concluded that his taxes would have totaled only about $30,000 on this $20.9 million in income, for an average tax rate of only 0.14%.  Note this is 0.14%, not 14%, but one-hundreth of that.  The figures are reported in an article in the Washington Post today.

Under the tax system in place for 2010, Romney had to pay an already low rate (for someone with his income) of just 14%.  Under Gingrich’s proposal, he would have gotten a 99% cut.

Ordinary income in 2010 was taxed at a rate of 35% for income above $373,650, but Romney benefits from the low tax rates on capital income.  He noted when he released his returns that he paid all that was owed “and not a dollar more”, and I would take this as an honest statement.  That is, I do not believe that Romney was doing anything illegal.

But this is precisely the problem:  the tax system is now structured so that the extremely rich in Romney’s position can legally pay a far lower rate than those in the middle.  Gingrich would have the rich legally pay almost nothing.  And when Obama says this is just not right, the Republicans loudly assert he is waging class warfare.

Republican Tax Plans: Part 3

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The Tax Policy Center has now analyzed the Santorum proposals for what the US tax system should be, and I have added the implied average tax rates to the above diagram for completeness.  Santorum would cut taxes for almost all income groups by even more than his Republican colleagues, except for those making more than $1 million a year whom Gingrich and Perry would tax even less than Santorum.

But the result of all these tax cuts is that Federal Government revenues would fall by an estimated $1.32 trillion in 2015 alone.  This is even higher than the $1.28 trillion in revenue losses under Gingrich.  But total Federal Government discretionary expenditure, on everything, including the military, is projected to be only $1.26 trillion in 2015.  The deficit would rise even if all this government expenditure were cut to zero (and you cannot cut to less than zero).  Yet Santorum says the government deficit is already too high.  He also says military spending should be raised, not lowered.

This is even less serious than the proposals of Gingrich.

Republican Tax Plans: Part 2

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In a post on December 26, I presented the average tax rates that would follow from the tax plan proposals of several of the main Republican candidates.  These were radical proposals, and would move America from the progressive tax structure it has always had (even under Reagan and Bush), to regressive taxes where the rich would pay at a lower rate than the middle class or (in the case of Cain) even the poor.

The calculations were done by the Tax Policy Center, a joint program of The Urban Institute and Brookings, and I simply presented their results graphically.  At the time of my December 26 post, the Tax Policy Center had only worked out (using their Microsimultation tax model:  see my earlier post) the implications of the proposals of Herman Cain, Rick Perry, and Newt Gingrich.  They have now (as of January 5) also worked out the implications of what Mitt Romney has proposed.  These tax rates are added in the diagram above (in brown).

As I noted in my earlier post, Romney’s proposals are in the same direction as those of Gingrich and Perry, but less extreme.  His plan would still lead to major reductions in the tax rates for the rich, especially the super-rich, although not to as low a rate as what Cain, Perry, and Gingrich have proposed.  And the overall tax rates would at least remain somewhat progressive, in contrast to the proposals of the others, but substantially less progressive than what they would be under either the current law (where the Bush tax cuts are allowed to expire as currently scheduled) or even what they would be if the Bush tax cuts are extended.  Under Romney’s proposal, those earning less than $30,000 per year (the very poor) would in fact pay more than they would should the Bush tax cuts be extended, while those earning between $30,000 and $50,000 would pay the same as under Bush.  But above $50,000, the richer one gets the less one would pay under Romney’s plan compared to what one would pay under Bush (and even less compared to what one would pay should the Bush tax cuts not be extended).

With the lower tax rates under Romney, especially for the rich, overall tax revenues would of course fall.  The figures calculated by the Tax Policy Center indicate revenues would be $600 billion less under Romney’s proposal in 2015 alone.  The ten year loss (where ten year figures are what are being used in the fiscal deficit discussions) would be more than ten times this, i.e. more than $6 trillion.  Although a bit less than half the loss under the cannot-be-serious Gingrich plan (which would lose $1.28 trillion in 2015 alone, or a loss that could not be covered even if one cut all federal government discretionary expenditures to zero), Romney never indicates what he would do to make up for this $600 billion annual loss in revenues.  Yet he repeatedly states in his campaign that it is critical to cut the fiscal deficit.

Romney claims to be a good businessman, but a plan that cuts tax revenues by $600 billion a year, equal to close to half of all government discretionary expenditure (including the military), is not serious.