By Jessica Chau
Today we bring you an article on how Romney’s tax plan would not deliver the economic growth he claims it would but would actually hurt our fiscal situation and exacerbate income inequality; a piece on how restoring the estate tax to the pre-Bush-tax-cut rates would go a long way toward blunting some of the sequestration cuts; and finally a quick look at how each candidate’s tax policies would impact their own as well as an average family’s tax rates.
Washington Post, Ruth Marcus, 9/25/2012
There are three fallacies and two dangers at the heart of Mitt Romney’s tax policy.
The first is the argument that cutting personal income tax rates would lead to economic growth robust enough to help pay for a big chunk of the cuts. The second, related, fallacy is the contention that raising rates on top earners would hurt growth. The third is that raising capital-gains rates would be even more harmful.
There is scant reliable evidence for any of the above, yet Romney and fellow Republicans hitch their entire economic argument to them. And their rabid pursuit of lower taxes leads to two dangers: further ballooning the national debt and further increasing income inequality.
Huffington Post, Sarah Bufkin, 9/25/2012
If the estate tax is restored to a level similar to its rate before the Bush-era tax cuts went into effect, the federal government could rake in over $500 billion in revenue over the next 10 years, according to an analysis by the Congressional Budget Office.
The windfall could make up a large portion of the $1.2 trillion that Congress needs to find by Jan. 2 in order to head off the potentially disastrous sequestration cuts currently scheduled to take effect by the year’s end.
“The catastrophe that the House has created is coming,” Rep. Jim McDermott (D-Wash.) told The Huffington Post. “At some point, people are going to have to face the fact that we need some revenue. And if we don’t face that, we’re going over a cliff … When we finally get down to this, it is going to be a bloodbath. We cannot cut the budget of this country $1 trillion without decimating everything that we consider civil government.”
Under the Office of Management and Budget’s analysis released on Sept. 14, the sequestration would be “deeply destructive to national security, domestic investments, and core government functions.”
Washington Post, Dylan Matthews, 9/25/2012
Now that all the candidates have released their 2011 tax returns, it’s possible to calculate what these policies mean for them. I did the taxes for Romney, Obama, and an average household (two adults, one child, making the median household income of $49,445) under Obama’s plan, Romney’s plan (both the paid for and not paid for versions, using the Tax Policy Center’s estimates), and Bowles-Simpson. Here’s how they stack up:
Both candidates pay the most under Obama’s plan. For the average American, conversely, Obama’s plan doesn’t change anything at all. Bowles-Simpson raises taxes on the median American and Romney but not on Obama; most of the increase on the median American comes from unwinding the exclusion on health insurance, which takes place over 20 years. The fact that Bowles-Simpson taxes capital gains as normal income, and that Obama’s plan treats carried interest and dividends as ordinary income, hits Romney’s wallet particularly hard.