How Romney Would Tax Us
This opinion piece originally appeared at Reuters.com.
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.
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.