By Sumi Kim
As far as I understand so far, it's unclear who's correct.
- Romney is proposing a 20% income tax rate cut, across the board.
- The income tax rate cut will be offset by closing loopholes and ending deductions. Romney has not made clear what these loopholes and deductions are, specifically.
- In theory, Romney's plan asserts that people, for the most part, will actually end up paying the same dollar amount in taxes, as the closed loopholes and deductions should offset the income tax rate cut.
However, the nonpartisan Tax Policy Center evaluated the plan and asserts that there are not enough loopholes and deductions to offset the 20% income tax rate cut, and therefore in reality, someone will have to pick up the slack. The Obama campaign argues that the middle class will have to bear most of this burden.
The Tax Policy Center crunched the numbers provided by Romney's campaign, and concluded that the tax cut would amount to ~$5 trillion.?
Absolutely yes. But not really.
The 20% across the board cut in marginal rates would indeed lower tax revenues by $5 trillion in a vacuum. But Mitt Romney will not push through such a plan (if elected) without at least some offsetting eliminations or restrictions on deductions. Now, let's be clear. In order for those to not negate the benefit of the lower rates on middle-class folks, the limitations have to fall disproportionately on the wealthiest.
And the wealthiest would benefit extraordinarily from an across-the-board 20% reduction in rates on top of the already low rates ushered in by the so-called "Bush tax cuts." No analysis done anywhere indicates you can limit deductions by anywhere near $5 trillion, especially when you focus those limitations on the small sliver of taxpayers at the top.
There is a reasonable argument, however, that a reduction in rates and limitations on deductions might lead to higher tax receipts than would otherwise occur. If that happens, like the reductions in deductions, it would offset some of the $5 trillion the tax cut unequivocally represents with offsets on the revenue side. How much? Less than $5 trillion. Exactly how much less? It depends.More questions on 2012 U.S. Presidential Election: