Romney's tax plan really does favor the rich

Romney's tax plan is not for the middle class. In fact, high-income households would win big and poor families would actually fare worse.
By Roberton Williams, Guest blogger / January 31, 2012


Despite evidence to the contrary, there is a lingering view that Mitt Romney’s tax plan would primarily help middle-income households and not favor the rich. Yet TPC’s analysis of the plan clearly showed that high-income households would win big and others would do less well. Poor families would actually lose, relative to the taxes they’re paying this year. What’s really going on?

Romney’s plan has five main components. In order of size, they are:

1. Permanently extend the Bush-era tax cuts. Romney would make the 2001-03 tax cuts and the AMT “patch” permanent for everyone, thus precluding the very large tax increases that would otherwise come at the end of this year. Most households would benefit but the largest tax savings would go to those with the highest incomes.

2. Cut the corporate tax rate from 35 percent to 25 percent. Using its assumption that owners of capital bear the full burden of the corporate tax, TPC found that more than half of the tax savings—roughly $100 billion in 2015 alone—would go to the 1 percent of households with the highest incomes. The assumption is controversial among economists, but even if workers or consumers bear part of the tax burden, high-income households would still enjoy a disproportionate share of the benefit of the lower tax rate.

3. Eliminate income tax on long-term capital gains and qualified dividends for households with income under $200,000. Nearly 80 percent of households already pay no tax on gains and dividends—either because they have no investment income or because they’re in the 15-percent tax bracket or below. This cut—about $40 billion in 2015—can only help the remaining 20 percent. Not surprisingly, the bulk of benefits go to high-income households. And, because the threshold would apply only to non-gains and non-dividend income, households in the top 1 percent would get nearly a tenth of the tax savings.

4. Repeal taxes imposed by the health reform legislation. The healthcare legislation raised the Medicare payroll tax by 0.9 percentage points for couples with income over $250,000 ($200,000 for single filers) and imposed a 3.8 percent tax on investment income for the same taxpayers. Repealing those taxes—worth nearly $40 billion in 2015—would help only the high-income households that would otherwise pay the tax. Not surprisingly, about 80 percent of the benefit would go to the top 1 percent.

Read more: http://www.csmonitor.com/Business/Tax-VOX/2012/0131/Romney-s-tax-plan-really-does-favor-the-rich