What is Mitt Romney鈥檚 tax plan?
With the presidential campaign finally reaching a soggy finish, TaxVox is taking a final pre-election look at the tax policies of Barack Obama and Mitt Romney. Last week,聽聽platform.聽Here is a rundown of Mitt Romney鈥檚 tax agenda.
The elevator speech: Romney favors multiple tax cuts for individuals and would reduce corporate income tax rates. By themselves, his聽specified tax cuts聽would reduce federal revenues by trillions of dollars over the next decade. However, Romney聽says he would avoid adding to the deficit through faster economic growth and unspecified聽reductions in current tax preferences. Romney would not use new taxes to help lower the deficit.聽
The details:
2001-2010 Tax Cuts: Romney would make all of the 2001-2008 tax cuts permanent. He鈥檇 allow some of the 2009-2010 tax cuts to expire as scheduled in January.
Additional tax cuts: He鈥檇 cut tax rates on ordinary income by 20 percent across the board. For instance, he鈥檇 reduce the top rate (35 percent following extension of the 2001 tax cut) to 28 percent.聽聽 He鈥檇 repeal the estate tax and the Alternative Minimum Tax. He鈥檇 also repeal the 2010 Affordable Care Act鈥檚 tax increases.
Taxes on investment income:聽 Romney would repeal the 2010 health law鈥檚 3.9 percent tax on investment income for high-income households.聽 He鈥檇 make capital gains, dividends, and interest聽tax free for households making聽 $200,000 or less, and聽tax capital gains and dividends聽at the current 15 percent rate for those making more than $200,000.
The payroll tax: Romney would allow the 2010 payroll tax cut to expire聽in January. He鈥檇 repeal the additional 0.9 percent Medicare tax on high-income workers that is due聽to take effect next year. Like the new tax on investment income, this extra Medicare levy is a product of the 2010 Affordable Care Act.
Tax preferences: Romney promises to finance his across-the-board rate cuts and his repeal of the AMT and estate taxes by limiting tax preferences, such as deductions, credits, and exclusions. However, he has not said how he would do this. He has suggested a dollar聽聽as one possible option.
Refundable credits:聽He鈥檇 retain refundable credits such as the Earned Income Tax Credit and the Child Tax Credit though in a much聽聽than today.
The corporate income tax:聽Romney would cut the corporate rate from 35 percent to 25 percent and extend the research and experimentation credit and full expensing of capital investment. He鈥檇 also propose further corporate rate reductions that would be funded by unspecified business tax increases.
International taxes:聽He鈥檇聽replace the existing tax regime for multinationals with a territorial system in which U.S. firms would owe no domestic tax on overseas profits while foreign firms would pay U.S. tax on U.S. income.
Taxes and the Deficit:听罢丑别 Tax Policy Center estimates the tax cuts Romney has proposed would reduce federal tax revenues by聽聽relative to a current policy baseline (that is, after most of the 2001-2010 tax cuts are extended). He vows to pay for these cuts with offsetting reductions in tax preferences but has not said how. Romney would use only spending cuts and economic growth to achieve long-term deficit reduction. He would not raise taxes by any amount to slow the flow of red ink.
If you want to know more, take a look at the聽聽of the Romney and Obama tax proposals, as well at TPC鈥檚 more in-depth analyses of the Obama, Romney, and Ryan plans.
