With so much attention placed on Mitt Romney’s verbal blunders, much less has been given to his written plans for the economy and taxes.
The Republican frontrunner’s 160-page “plan for jobs and economic growth,” which he released in September, contains some sound ideas. He would encourage more Americans to save and invest. And one of his proposals would strengthen America’s status as a technological powerhouse. See the plan here.
But there’s a side to the plan that would raise taxes on the poorest 125 million Americans while tilting tax cuts further toward the rich.
President George W. Bush cut taxes for almost everyone who paid income taxes. Romney would make the Bush tax cuts permanent. But that’s only a first step.
He would also raise taxes on poor families with children at home and those going to college. Romney does this by reducing benefits from the child tax credit and the earned income tax credit and by ending the American Opportunity tax credit for college education.
Without these tax breaks, the poorest fifth of taxpayers would pay $157 more in taxes in 2015 than under current policy, the Tax Policy Center says in its analysis of Romney’s plan. The second poorest group would pay $82 more, according to the center, whose past work has been praised by Republicans and Democrats alike.
TAX CUTS
While Romney would make these two groups — the poorest 125 million Americans — pay higher taxes, the top 60 percent all would get tax cuts. The top tenth of one percent would save, on average, $464,000 a year, the Tax Policy Center’s analysis says.
His plan gives one third of his tax cuts to the top tenth of one percent of taxpayers. By comparison, Bush gave this group only one eighth of his cuts.
Romney would also eliminate estate and gift taxes, a policy that I believe would damage the spirit of striving that has served us so well until now, replacing it with a new era of dynastic wealth.
Romney’s campaign did not answer specific questions about his tax proposals, referring me instead to the plan itself.
On the more positive side of the ledger, Romney’s plan would let households earning less than $200,000 a year collect capital gains, dividends and interest tax-free. That would encourage more Americans to build cash nest eggs and to own stocks and bonds above and beyond their retirement plans.
Unlike today, when a shrinking minority of Americans has savings accounts and bonds, in the 1970s a majority earned interest. Back then, a couple could collect $400 of interest and dividends tax-free.
Romney’s plan would give unlimited tax-free interest, dividends and capital gains to about 98 percent of households. (I have recommended the same tax break be given to everybody, but with a $1,000 cap, twice that for married couples, on tax-free capital income.)
NO TAX BREAK
Given the news coverage of the low tax rate Romney paid in 2010, and expects to pay for 2011, people could easily assume he would get a huge tax break under his own plan. That is not the case.
Under his plan, high-income taxpayers would continue to pay 15 percent on their capital income, about the same rate Romney paid in 2010 and expects to pay for 2011.
As a taxpayer, Romney would do much better under rival Newt Gingrich’s tax plan. Gingrich would let everyone collect capital gains, dividends and interest tax-free. Had that been the law in 2010, Romney’s tax bill would have been cut by at least 97 percent, my calculations show.
Another provision in Romney’s plan would be to raise the ceiling on the number of visas issued to holders of advanced degrees in math, science and engineering who have job offers in those fields from U.S. companies.
While this seems like a smart idea, it does have a downside. Software engineers and others already complain that foreign workers on visas are depressing their wages, and Romney’s plan would likely make it worse. But employers will love it.
Romney, whose father was born in Mexico, would also let foreign-born students stay in the United States, provided they earn advanced degrees in engineering, math or science. And he would open the doors to wealthy people because he believes they are “job creators.”
Those last two provisions seem very smart. It is also exactly what happens in Canada, where one in five Canadians is an immigrant.
These are serious issues with potentially far-reaching implications. This is what the media should be examining, instead of verbal trivia from the campaign trail.
PHOTO: Republican presidential candidate Mitt Romney speaks at a campaign event at an RV dealer in Loveland, Colorado February 7, 2012. The Colorado caucuses take place today. REUTERS/Rick Wilking
why would anyone then buy a tax-free bond if they pay no tax on interest earned on normally taxable bonds? how devastating would that be to municipalities already in the red? romney’s plan is just another trickle down scheme that merely makes the rich richer and everyone else poorer. what’s new in his plan that hasn’t been tried before and failed miserably?
I would be interested to see his policy’s effect without the reduced credit for children. While giving poor families extra money to help raise children is good, it has unintentionally encouraged those who can least afford children to have the most of them. Other than that, it would seem to be a decent deal for the lower quintiles.
As for immigrants…they have been shown time and again to be far more likely to start small businesses. Besides, much better to have the labor come to the US and work where we can tax it, than to have the jobs go to the labor (which they will).
Only really disappointing thing is the removal of the inheritance and gift tax. Considering estate tax only applies to amounts over 5 million, its shameless pandering to the ultra rich.
jcfl — muni bonds are only tax free because its become politically impossible to remove the obscure provision that created this loophole in the first place. And yes, its a loophole, granted a well known one. Oh and guess who buys munis? Trust funds for the ultra rich. They’re expensive and volatile so ordinary people stay away from them. I don’t have much sympathy for municipalities that have such disastrous budgets that no one else will buy their bonds.
I do like the fact that there would be no taxes on capital gains, interest and dividends for lower income earners. But I would rather have a gradual phaseout from 0% to regular income tax rates on capital gains, interest and dividends seeing as how the most wealthy americans use this loophole to pay such little in taxes. Not that I fault them for doing so, I would do the exact same thing if I were in their position!
-PF Pro http://www.yourPFpro.com
Romney’s tax plans as described here sound like “Bush on steroids.”
Well written examination of Romney’s tax plan, considering the venue you have to work with.
If Romney is elected it does not bode well for the future of this country.
I agree that “This is what the media should be examining, instead of verbal trivia from the campaign trail”.
PseudoTurtle CPA/MBA
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