Like the president, Mitt Romney will also not let the Bush tax cuts expire. However, unlike Obama (see previous post), Romney would cut taxes even further. Here is a summary of how he would change tax rates based on analysis from the Tax Policy Center:
Here are some highlights of his plan. If elected, Gov. Romney would: 1) Make the Bush tax cuts permanent; 2) Further cut individual income tax rates by 20% across the board, bringing the top rate down from 35% to 28%; 3) Repeal the Alternative Minimum Tax (AMT). This is important because if the AMT is not repealed, any savings from his tax cuts would be absorbed because many people would end up paying the AMT; 4) Repeal tax provisions in Obama’s health care legislation and in the 2009 stimulus such as the American opportunity tax credit, the Earned Income Tax Credit (EITC) and the expanded child care credit. As I mentioned in my previous post, Obama would extend these credits; 5) Eliminate taxes on long-term capital gains, dividends, and interest for married couples with income under $200,000; 6) Eliminate the estate tax; 7) Reduce the corporate income tax rate from 35% to 25%; and 8) Like Obama, extend the Research & Experimentation (R&E) tax credit.
What would these tax cuts do? Compared to current law, under which the Bush tax cuts are allowed to expire in 2013, Romney’s tax plan would reduce government revenue by $900 billion or 24% in the year 2015 alone. On the other hand, compared to what would happen if we just extend the tax rates in 2012 (i.e. just extend the Bush tax cuts) to 2015, Romney’s plan would further reduce revenue by $480 billion.
Obviously, these numbers present an immediate problem because they indicate that the federal deficit will increase significantly under the Romney plan. Gov. Romney has assured us that he would remedy this defect by eliminating certain tax deductions and loopholes. He believes that these measures, together with the economic growth that would result from reducing tax burdens on individuals and corporations, would offset the cost of his tax cuts and make his plan revenue neutral for the government. Are there enough deductions that could be eliminated to offset the cost of his tax cuts? If so, what are they? On these questions, Romney has remained silent. Moreover, he has promised to not raise taxes on capital gains and dividends, and to not increase taxes on savings and investments (in fact, he would lower them). In the absence of these sources, the path to a revenue neutral plan even more difficult. Finally, even if his plan were somehow revenue neutral, Romney has not specified what he would do to reduce the federal deficit.
Having laid out the information we have from both candidates on their tax policies, my next post will detail my own opinion on the matter.