The Romney tax plan: Not a tax hike on the middle class

Democrats launched a surprising attack on GOP presidential nominee Mitt Romney in recent weeks when they accused the governor of trying to raise taxes on the middle class. This criticism is odd coming from the party that unapologetically seeks hundreds of billions of dollars in tax hikes and that adopted numerous tax increases, including some on the middle class, in President Obama's healthcare reform. The Democrats' attack is also an about-face on their standard argument that Republicans think the solution to every problem is another tax cut.

The Democrats have spent millions of advertising dollars in an intensive and well-coordinated attack on Romney's proposal to simplify, streamline, and reform the tax code-a tax code that virtually no one thinks works well. Two think tanks, Obama's campaign, super PACs, and high-profile media reports have all converged on this message.

Romney recently spelled out his tax reform objectives to Meet the Press: "Bring our rates down to encourage growth, keep revenue up by limiting deductions and exemptions, and make sure we don't put any bigger burden on middle income people." 

What Is Actually Included in Romney's Tax Plan
In order to objectively assess the claims made by the critics, let's begin by looking closely at the key components of Romney's proposal:

  • Reduce statutory income tax rates 20 percent, from 10, 15, 25, 28, 33, and 35 percent to 8, 12, 20, 22.4, and 28 percent.
  • Reduce the corporate tax rate from 35 percent to 25 percent. 
  • Repeal the Alternative Minimum Tax for individuals and corporations.
  • Repeal the estate tax.
  • Eliminate, curtail, and reform numerous special provisions in the tax code-the credits, deductions, and exclusions that cause complexity, compliance problems, distortions, and inefficiencies.

 

In many regards, the Romney plan is like that of Obama's bipartisan Simpson-Bowles Commission. Both plans share a structural consistency of low tax rates and a broader tax base. One important difference is that Romney proposes to keep the top tax rate on capital gains and dividends unchanged while Simpson-Bowles proposes raising those rates considerably. Furthermore, the Simpson-Bowles plan is an explicit tax increase-$80 billion a year more than even Obama has proposed-while Romney's tax reform plan is revenue neutral. 

Read the full article on The American.

Alex Brill is a research fellow at the American Enterprise Institute.

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About the Author

 

Alex
Brill
  • Alex Brill is a research fellow at the American Enterprise Institute (AEI), where he studies the impact of tax policy on the US economy as well as the fiscal, economic, and political consequences of tax, budget, health care, retirement security, and trade policies. He also works on health care reform, pharmaceutical spending and drug innovation, and unemployment insurance reform. Brill is the author of a pro-growth proposal to reduce the corporate tax rate to 25 percent, and “The Real Tax Burden: More than Dollars and Cents” (2011), coauthored with Alan D. Viard. He has testified numerous times before Congress on tax policy, labor markets and unemployment insurance, Social Security reform, fiscal stimulus, the manufacturing sector, and biologic drug competition.

    Before joining AEI, Brill served as the policy director and chief economist of the House Ways and Means Committee. Previously, he served on the staff of the White House Council of Economic Advisers. He has also served on the staff of the President's Fiscal Commission (Simpson-Bowles) and the Republican Platform Committee (2008).

    Brill has an M.A. in mathematical finance from Boston University and a B.A. in economics from Tufts University.

  • Phone: 202-862-5931
    Email: alex.brill@aei.org
  • Assistant Info

    Name: Brittany Pineros
    Phone: 202-862-5926
    Email: brittany.pineros@aei.org

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