WASHINGTON (AP) — Good luck figuring out whether Republican presidential candidate Mitt Romney would cut or raise your taxes if he’s elected president. President Barack Obama promises tax reform, too, but precious little detail.
Unlike Romney, Obama wants to make sure any tax reform produces a big new chunk of revenue to address the deficit. Yet it’s difficult to do that and not hit the middle class. It’s Romney’s far more ambitious tax plan, however, that has become front and center in the presidential campaign.
Romney promises a 20 percent cut in tax rates, but he won’t say which deductions he’ll kill to pay for it. He promises a wholesale rewrite of the tax code that would cut income tax rates across the board, taking the top rate from 35 percent to 28 percent.
Romney’s plan offers the dessert of sweeping tax cuts but not the vegetables of how he would pay for it. He and running mate Paul Ryan — his House GOP budget plan promises an even lower top tax rate of 25 percent — say they’ll curb tax breaks and rely on fresh revenue from economic growth to recoup the cost.
Obama would instead raise that top rate to 39.6 percent, making clear he’s still wedded to the idea that individuals with incomes above $200,000 and couples earning above $250,000 should pay more. It’s never gotten anywhere on Capitol Hill, even when Democrats had sweeping House and Senate majorities in Obama’s first two years in office.
Romney says he will eliminate taxes on inherited wealth and abolish taxes on capital gains and investment income for couples making less than $200,000 a year. He also would do away with the alternative minimum tax.
All of this, the Republican vows, will not reduce the share of taxes paid by wealthier people — nor raise taxes on the middle class or poor.
“I’m not going to raise taxes on anyone,” he promised in his first debate with Obama.
Critics of Romney’s plan say it simply doesn’t add up. They say the estimated cost of the cuts — the $5 trillion over a decade figure tossed about on the campaign trail and in Obama’s television ads — can’t be recouped without slashing deductions and other tax breaks that chiefly benefit the middle- and upper middle-class.
Such popular — and entrenched — tax breaks include the deductions for home mortgage interest, charitable giving, and state and local taxes and the exclusion for employer-paid health insurance.
“You can’t do all those things,” said Roberton Williams of the Tax Policy Center, a Washington-based think tank. “The rich get such savings from the rate cuts that there just aren’t enough tax breaks that benefit them that taking them away would recoup the full lost revenue from the rate cuts.”
Such critics were given a boost on Friday when the nonpartisan tax analyst for Congress released a study that says eliminating all itemized deductions would pay for just a 4 percent cut in tax rates — far below Romney’s 20 percent target.
Republicans pointed out that the Joint Committee on Taxation analysis was simply a sketchy outline of tax reform concepts and that there are very big differences between the panel’s assumptions and the Romney plan. For starters, the congressional study started from a narrower set of tax breaks from which to finance the rate cuts.
However, wiping out every tax deduction — including those for mortgage interest, for state and local taxes and for charitable giving, but leaving breaks for health insurance and retirement savings or the personal exemption alone — would raise $2.5 trillion over a decade, just about half of the cost of Romney’s plan.
Romney’s plan to swap a $5 trillion slice of revenue over a decade from rate cuts while gleaning an equally big slice of revenue by curbing deductions and other tax breaks faces enormous, perhaps insurmountable challenges. The estimate comes from the Tax Policy Center, a think tank that’s a joint project of the Brookings Institution and the Urban Institute.
The nonpartisan think tank recently rattled the debate with a study that estimated that Romney’s plan would require slashing middle-class tax breaks so deeply that a family making between $75,000 and $100,000 could have to pay an average $2,000 more.
The Romney campaign disputes the math and the methodology and insists it’s possible to do. Romney himself has tossed out hints that he might cap taxpayer deductions at, say, $17,000, $25,000 or $50,000. A campaign aide said he’s considering curbing personal exemptions and the tax exclusion of employer-paid health insurance, particularly for those with higher incomes.
But without specifics it’s impossible to analyze who would pay more and who would pay less. For families with children, a big mortgage, and who live in high tax states, for instance, might face a tax increase, while people who’ve paid off their houses and live in low tax states would see a tax cut.
Obama’s core promise on taxes is what it’s always been: Renew the tax cuts passed during George W. Bush’s tenure, except for individuals whose income exceeds $200,000 and for married couples exceeds $250,000. That would raise the top income tax rate from 35 percent to 39.6 percent, back where it was during the Clinton era.
Obama also recommends limiting itemized deductions for such higher earners, phasing out their personal exemptions and increasing their rate on capital gains from 15 to 20 percent.
But Obama has never fought hard for the official tax plan that’s in his budget, though he vows to hold the line and increase taxes on the wealthy if re-elected.
Instead, Obama hints he could support comprehensive tax reform like he did in negotiations with GOP House Speaker John Boehner of Ohio last summer. The Democratic platform says he’s “committed to reforming our tax code so that it is fairer and simpler” and also guarantees that “no millionaire pays a smaller share of his or her income in taxes than middle class-families do.”
It’s commonly believed in Washington that the only way Republicans could ever vote for higher revenues — no easy assumption — is as part of a tax reform plan that lowers all rates, sharply curbs tax breaks and skims some of the revenue to defray the deficit.
Some Democrats, like Sen. Chuck Schumer of New York, say it’s impossible to do all three without hitting the middle class.
More Related Stories
- Lois Lerner, IRS disaster
- Who is "Company Doe?": A new test in corporate secrecy
- Weak, incompetent Democrats blow another one
- Donald Rumsfeld worried that marriage equality will lead to polygamy
- Biden cracks Obama teleprompter joke
- IRS official takes the Fifth: "I have not done anything wrong"
- Experts: Fox News spying scandal a game-changer
- Lessons from Lincoln leave gay immigrants behind
- Los Angeles elects first Jewish mayor
- Peter King: There's "hypocrisy" over aid by Oklahoma senators
- Anthony Weiner announces run for NYC mayor
- How policy nihilists in the Senate doomed LGBT immigrants
- On freedom of speech, Obama-Nixon comparisons are apt
- Senate panel approves immigration overhaul
- Slave descendants seek equal rights from Cherokee Nation
- Peace Corps to allow gay couples to volunteer together
- Is abortion about to doom Republicans again?
- Anti-voter-fraud Tea Party group sues the IRS
- The Bachmann-inspired romance novel
- Nate Silver: Why the scandals aren't hurting Obama
- How to oust Michele Bachmann from Congress
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11