THINKPROGRESS
ECONOMY
On the campaign trail, Mitt Romney
has been promising that he will cut taxes “across the board,” while also instituting tax reform that will
not add to the nation’s deficit. But a new report from the Tax Policy Center at the Brookings Institution shows that this is much easier said than done.
In fact, if Romney were to actually implement his plan to reduce tax
rates by 20 percent while eliminating tax deductions in order to pay for
it, taxpayers with more than $200,000 would certainly see a tax cut.
But everyone else — 95 percent of Americans —
will see their taxes increase.
And this result occurs even assuming that Romney would eliminate tax
deductions so as to make the tax as progressive as possible:
To estimate how average household tax burdens among
different income groups would change as a result of this shift, we
assume that the available tax expenditures are curtailed “from the top
down” in order to make the tax plan as progressive as possible…Even
after eliminating all available tax expenditures for households earning
more than $200,000, this group still faces a net tax break.
Americans making over $1 million would see an increase in after-tax
income of 4.1 percent (an $87,000 tax cut), those making between
$500,000 and $1 million would see an increase of 3.2 percent (a $17,000
tax cut), and those making between $200,000 and $500,000 would see an
increase of 0.8 percent (a $1,800 tax cut).
Because taxpayers above $200,000 as a group have received a
net tax cut, revenue neutrality requires that taxpayers below
$200,000—about 95 percent of the population—experience a tax increase.
Here’s how the plan would affect the average taxpayer in each income
group. As the column labeled “revenue neutral” shows, all taxpayers
making less than $200,000 would see their taxes
go up by hundreds, if not thousands, of dollars. In particular, families with children would see their taxes go up by $2,041, on average:
Again, this analysis assumes that deductions are eliminated in a way
that would make the tax code as progressive as possible, so its likely
that, in practice, Romney’s plan would look even worse. To this point,
Romney has refused to specify which deductions he would limit or
eliminate.
On several occasions,
Romney has denied that his tax plan would provide a big tax break to
the wealthy. But as this analysis shows, even giving him all of the
benefit of the doubt when it comes to eliminating deductions, the plan
is
still a massive tax break for the rich.
Update
The
Romney campaign is pushing back on the Tax Policy Center’s study by
claiming that TPC is a “liberal” group, due to the fact that one of its
analysts used to work for the Obama administration. However, when TPC
analyzed Gov. Rick Perry’s (R-TX) tax plan during the GOP presidential
primaries, the Romney camp called it an “
objective, third party analysis.”
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