The Brookings Institution has analyzed the new tax system overhaul that Mitt Romney has proposed and concluded that it would give big tax cuts to high-income households and increase the tax burden for middle- and lower-income households
Because Romney has yet to propose an actual tax plan, the researchers modeled a revenue-neutral income tax change that incorporates some of Mr. Romney’s proposals, which include lowering marginal tax rates, eliminating both the alternative minimum tax and taxation of investment income of most taxpayers, eliminating the estate tax and repealing the additional high-income taxes passed with the Affordable Care Act.
All by themselves, these cuts to personal income and estate taxes would reduce total tax revenue by $360 billion in 2015 relative to what is expected of current policy, according to the Brookings scholars.
Mr. Romney has said that his plan will include offsets to the revenue losses from his proposed lower tax rates, although he has not specified what kinds of policies would offset those cuts (that is, how he would come up with an additional $360 billion to offset the lost $360 billion in tax revenue).
Ann thinks this is funny.
The Brookings analysis assumes that those offsets would be achieved chiefly through reducing or altogether eliminating other tax breaks — like the mortgage interest tax deduction or the child tax credit — and does not factor in spending cuts as a means to offset lost tax revenue.
But even if all possible loopholes for households earning more than $200,000 were eliminated, this group would still be a net gainer under Mr. Romney’s plan, since the marginal tax rate decreases and other changes lop off so much of its tax burden.
As a result, middle- and lower-income households — the 95 percent of the population earning less than about $200,000 annually — would have to make up the difference.
“It is not possible to design a revenue-neutral plan that does not reduce average tax burdens and the share of taxes paid by high-income taxpayers under the conditions described above, even when we try to make the plan as progressive as possible,” write the study’s authors, Samuel Brown, William Gale and Adam Looney.
If the elimination of tax breaks starts with those affecting the top earners, the authors estimate, those earning under $200,000 a year will see their cash income fall by about 1.2 percent, as shown in the chart below. The very top earners — those earning more than $1 million a year — will by contrast see their cash income rise by 4.1 percent.
This analysis assumes that base-broadening — elimination of tax expenditures — occurs “starting at the top” so that tax preferences are reduced or eliminated first for high-income taxpayers to make the resulting plan as progressive as possible.
And still, all of the guys in the top 2-3% make out, while the rest of us get screwed as usual. Don’t vote for Mitt. Please.