Mitt's Plan

June 22, 2012  ·  Filed under: Education, Other Tax Plans

Here is Mitt’s Plan – What do you think?
Romney -> Issues -> Tax

Reducing and stabilizing federal spending is essential, but breathing life into the present anemic recovery will also require fixing the nation’s tax code to focus on jobs and growth. To repair the nation’s tax code, marginal rates must be brought down to stimulate entrepreneurship, job creation, and investment, while still raising the revenue needed to fund a smaller, smarter, simpler government. The principle of fairness must be preserved in federal tax and spending policy.

Individual Taxes

America’s individual tax code applies relatively high marginal tax rates on a narrow tax base. Those high rates discourage work and entrepreneurship, as well as savings and investment. With 54 percent of private sector workers employed outside of corporations, individual rates also define the incentives for job-creating businesses. Lower marginal tax rates secure for all Americans the economic gains from tax reform.

  • Make permanent, across-the-board 20 percent cut in marginal rates
  • Maintain current tax rates on interest, dividends, and capital gains
  • Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains
  • Eliminate the Death Tax
  • Repeal the Alternative Minimum Tax (AMT)

Corporate Taxes

The U.S. economy’s 35 percent corporate tax rate is among the highest in the industrial world, reducing the ability of our nation’s businesses to compete in the global economy and to invest and create jobs at home. By limiting investment and growth, the high rate of corporate tax also hurts U.S. wages.

  • Cut the corporate rate to 25 percent
  • Strengthen and make permanent the R&D tax credit
  • Switch to a territorial tax system
  • Repeal the corporate Alternative Minimum Tax (AMT)

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14 Responses to “Mitt's Plan”
  1. With regard to corporate taxes, using the 2007 data provided in the Kotlikoff/BHI “What Rate Works” study, corporations paid $291 billion in federal taxess on sales of $9.5 trillion or an average cost of 3.1% of sales. We can talk all day about how 35% averaged 3%, but my point is that reducing the corporate tax rate to 25% doesn’t seem very important. Any comments?

    Hank Van Gieson  ·  Jun 22, 2012 at 9:19 am  ·  Permalink
  2. In what sense? Revenue wise or dynamic economic growth and tax burden perception to international businesses? I see reducing the corporate tax rate as probably one of the more effective ways to increase economic growth, particularly when taken with the territorial changes. I hope that reducing the rate is a product of removing special interest loopholes.

    Morphh  ·  Jun 22, 2012 at 10:02 am  ·  Permalink
  3. Reducing the “special interest loopholes” can only lead to a higher average corporate income tax rate, not lower? After all, isn’t that really how that 35% gets to be an average of 3%. Loophole magic.

    Cut the corporate income tax rate to zero and I’m with you all the way. I believe that only people pay taxes, and that the job of corporations is jobs. Am I wrong?

    Hank Van Gieson  ·  Jun 22, 2012 at 12:25 pm  ·  Permalink
  4. Hank,

    I am also in favor of totally eliminating corporate income taxes…..only people pay taxes.

    John Bailey  ·  Jun 22, 2012 at 4:30 pm  ·  Permalink
  5. Hank, Removing loopholes would neither result in a higher or lower average tax rate in and of itself. The system picks winners and losers, so while a few may have 3%, others have 30%. By removing the loopholes, you reduce the overall marginal tax rate to a flat level where everyone is treated equally. So if the total corporate tax burden is $12, one business (with good lobbyists) pay $4 and another business pays $8. Removing the loophole would have them both paying $6. This is how the marginal rate of 35% could go to 25%, as the marginal rate more accurately reflects the average rate. Now this does not remove progressiveness based on income or anything, it just removes the special interest loopholes like ceiling fan importers to racetrack owners (yes those are actual tax breaks). I’m not saying this is how Romney is doing it. Just saying I’d like to remove government picking winners and losers and have a more flat (and accurately reflected) corporate tax rate. Of course, I’d also like a lower corporate tax rate – as John said, 0% would be nice but I think that would fall well below the Laffer curve.

    Morphh  ·  Jun 23, 2012 at 6:19 am  ·  Permalink
  6. Morphh,

    Please elaborate just what you mean by a zero corporate tax rate being below the Laffer curve?

    Hank Van Gieson  ·  Jun 23, 2012 at 7:38 am  ·  Permalink
  7. Morph,

    I don’t think it’s possible to be below the Laffer curve, is it?

    Actually, does it matter? In the end, the taxes are really paid by people, the corporations just pass it on to consumers (via higher prices) or employees (via lower wages) or investors (via lower returns).

    The Laffer curve, as I am sure you are well aware, indicates that there is some marginal rate at which tax revenue collected is a maximum and that rates above that will reduce the revenue collected (100% marginal rate means no more additional revenue can be collected) and also that as rates fall below that optimal marginal rate revenue collected also is reduced all the way down to 0% marginal rate (again no additional revenue will be collected)

    So at a rate of 0% no revenue will be collected…….from corporations which is what we want (isn’t it?). So it’s still actually on the Laffer curve…..just at the origin (regarding revenue collected from corporations).

    John Bailey  ·  Jun 23, 2012 at 9:52 am  ·  Permalink
  8. Sorry, what I meant was well below optimal for revenue collection / production. That it would be at the bottom / furthest left. This includes loss of economic production to other countries due to higher corporate tax rates. 0% rate would give us maximum production & 0 direct revenue (though indirectly it may create significant revenue due to economic growth / employees / spending). Increasing the rate above 0% could still maintain an economic advantage to competing countries. I don’t know at what percentage such a loss occurs, but all seem to agree that we are above it today – we’re seeing that loss. So what I meant by below the Laffer curve.. I was just trying to say it was below whatever that percentage is that would allow us to be an attraction for businesses with regard to taxation in comparison to alternative tax regimes. I want international business to move to the U.S. because we have low corporate taxes – 0% would certainly do that, but so would 10%.

    Morphh  ·  Jun 23, 2012 at 2:01 pm  ·  Permalink
  9. Gentlemen,

    As perhaps the only (retired) tax practitioner in the group, I offer first that I agree wholeheartedly with John Bailey. The coirporate tax should be repealed and the tax burden borne by individuals (who would experience offsetting price reductions).

    Based upon my lifetime of experience, not only is the cost of filing tax returns, but even more so the cost of having to consider the tax effects of every business transaction, would release a tremendous amount of business resources.

    I would toy with an “export” tax (to replace the IT-P/R taxes) of exporters.

    IMHO, we need no other incentive nor consideration.

    Once you put back in even a low rate, you need to have a great deal of compliance AND the need to consider tax effects of all transactions (which rises with the tax rate).

    We can eliminate the corporate IT without a FT.

    While there are many “loopholes” do not fall into the superficiality that everytrhing is a “loophole”. The popuilar current illustration os GE. When I read their explanation, I learned that a large “loophole” they employed was to use their tremendous “Net Operating Loss Carryforward” (notice that the LEFT calls this a “loophole” deceptively because they were focusing on “current” tax payments and ignored the entire world of “deferred” taxes wherein the tyax is postpones but forgiven permanenetly.

    In the GE case, GE lost money the years befor and gotr little or no tax relief fopr those losses and is now carrying them forward – this is no “loophole” in facts it is the reverse. Under current tax law, GE paid taxes in the prior 100 (?) years, but lost money in say 2010. GE is currently allowed top carry that 2010 loss back ONLY to 20-2009 and then forward for the 20 years after 2010.
    Why shouldn’t GE be able to acrry back its losses to recvover all of the taxes it paid in the the prior 100 years. Why is it able tio carry it losses forward for ONLY 20 years. Heads the Govt wins, tails the taxpayer losses.

    Stephen C. Eldridge  ·  Jun 23, 2012 at 3:24 pm  ·  Permalink
  10. Romney’s plan for Individual taxes move somewhat in the right direction (compared to Obama), but still leave a lot to be desired.

    I would like to see a courageous, drastic simplification and flattening of the tax.

    As to his specifics noted above, I thing reducing investment taxes ONLY on those earning below $200,000 demonstrates bad prionciples in that it memorializes Socialist class warfare.

    While we all hate the AMT, ity does punish most the Liberals in NY & CA (it is driven substantially by high State Income Taxes and property taxes). In lieu thereof, I would eliminate AMT, but only if accomopanied by elimination the deductions for State Income taxes and property taxes.

    Stephen C. Eldridge  ·  Jun 23, 2012 at 3:31 pm  ·  Permalink
  11. Calrification re: # 9

    To avoid getting misled by those screaming out against all “loopholes” one must study each claim specifically.

    One may reduce CURRENT taxes – but will increase LATER taxes.

    Some, like the Net Operating Loss are just the opposite of a “loophole”.

    Stephen C. Eldridge  ·  Jun 24, 2012 at 12:24 pm  ·  Permalink
  12. So how does Obama get away with claiming Romney is going to raise taxes on the middle class? Mitt’s plan states:

    “Make permanent, across-the-board 20 percent cut in marginal rates”

    This coming from the guy that passed the largest tax increase in American history on the middle class called Obamacare.

    Morphh  ·  Aug 16, 2012 at 2:39 am  ·  Permalink
  13. Though the Fair Tax may be an improvement to the current system, there are better ways. This article explains it incredibly well, and offers a much better alternative.

    Erik  ·  Aug 26, 2012 at 2:21 am  ·  Permalink
  14. I don’t see it as an either/or on wealth taxes or fairtax.

    Fairtax advocates think fairtax would be distributionally neutral. William Gale at brookings and I think it would NOT be distributionally neutral-and would further concentrate wealth/asssets due to trickle up effects in the existing economic structure.

    What I have been publicly stating for years: I would support fairtax if there were an iron clad guarantee that if there were any further concentration of wealth/assets in the upper 1% or upper 5% that we’d gradually raise a tax on assets until that was no longer the case. If fairtax actually worked as advertised, fairtax supporters would get exactly what they are asking for. If not we’d wind up with a mix of an asset tax and fairtax.

    Wharton published a study a while back on a flat tax and asset tax-and said it would be necessary to get about 25% of governent revenue from asset taxation for a flat tax to be distributionally neutral. My guess is the same holds for fairtax. We’d wind up with a 17% fairtax and the rest coming from assets taxation-just to replace the current system and not give the really wealthy a huge windfall.

    I think a good argument can be made for reducing the fairtax rate further(or increasing the prebate) by adding a tax on pollution/carbon into the mix. Just complying with Kyoto would take another 5% off from the fairtax rate-and shift onto coal, oil, natural gas(and would make wind/nuclear/solar much more competitive instantly). We need something like this because current regulations are moving stuff like non-ferrous metal production from the US to Canada/Mexico.

    Randall Burns  ·  Sep 29, 2012 at 4:52 pm  ·  Permalink