Romney’s tax plan for the 1%

On the heels of Mitt Romney’s narrow eight-vote victory in the Iowa caucuses Tuesday, the Tax Policy Center has put out a timely distributional analysis of the tax components of his economic plan. Over the course of his campaign, TPC notes, Romney has proposed “permanently extending the 2001-03 tax cuts, eliminating taxation of investment income of most individual taxpayers, reducing the corporate income tax, eliminating the estate tax, and repealing the taxes enacted in 2010’s health reform legislation.”

According to TPC, Romney’s tax plan would result in a significant increase in the deficit. Against a scenario in which the Bush tax cuts (and other provisions) are allowed to expire, the Romney plan would lower revenue by $600 billion in calendar year 2015, about a 16 percent cut. Assuming all expiring tax provisions are extended, his plan would reduce revenues by $180 billion in the same year.

How would people fare under the Romney plan? Distributional tables show the majority of the benefits from the proposed tax changes would go to those at the top of the income scale. Using a current policy baseline scenario, almost 60 percent of the share of total federal tax changes would go to those in the top 1 percent, and one-third of changes would go to those in the top 0.1 percent. (The figure below shows distributional effects under both a current law and current policy scenario.) Tax units making over $200,000 would see over 80 percent of the benefits. It is important to bear in mind that the top 1 percent of households received 65 percent of all income gains over 2002-07; these are generally not households struggling to make ends meet.

In contrast, many lower-income taxpayers would actually see their taxes increase because the Romney plan would allow the American Opportunity tax credit and portions of the earned income tax credit and the child tax credit to expire. In fact, according to the TPC analysis, over half of the taxpayers facing a tax increase under Romney’s plan actually make less than $30,000 a year.

It’s not like we haven’t trod this path before. The Bush-era tax cuts blew a hole in the budget and failed to generate even mediocre economic results for middle-class households. Yet Romney’s tax plan, like many others being put forth in this election, doubles down on dangerous tax cuts, while heavily weighting the benefits toward the wealthy.

  • Joshua Kricker

    So basically more of the same that we had under DUMBYA only a lot worse for the poor and the working class.

  • Cybernove

    Now I understand why Mitt R. ( unemploy, corporation are people)  want to be president.  How much money would be enough for people like him?

  • Stellagh444

    Of course, all of this seems ludicrous. But what other way is there to stimulate investment in new jobs at the personal as well as the corporate level while making estate inheritance “revenue neutral?” I can’t find the word “greed” in any of this.
    That’s because all Mitt needs to do is wave a US flag — or a cross — in enough people’s faces to get them to vote against their own economic well-being. For the umpteenth zillion time.
    Works for me.
    Romney’s plan is “W’s” plan all over again all right. I.E., the continuation of self-reward with more collateral damage to offer than any significant economic renewal for working-class Americans. Worse, it also continues the pervasiveness of putting micro-economic goals ahead of macro-economic reality.
    And it’s also another day at the office for those of unparalleled wealth to keep pumping money into opaque, OTC markets for ABSs, CBSs, hedge funds, and default swaps. When in the hell is somebody going to rein this crap in?
    I also can’t find the word “speculation” anywhere in the Bill of Rights. Neither can I find the word “capitalism.”  These aren’t constitutional rights.
    Nor is overthrowing America’s current economic system grounds for treason. There’s nothing wrong with our current system of government that can’t be fixed in a peaceful and non-violent manner. It’s our economy that’s obsolete. It will never generate the number of jobs required for real prosperity nor overcome the obsession for short-term profit-taking with the means to remedy America’s long-standing social ills.

    • pelle lindbergh

      I would like to correct an error in this posting.  When I said “for the umpteenth zillion time” I meant “for the umpteen zillionth time.”  The author regrets the error.

      However, references I made to the opaque, OTC so-called “derivatives markets” of 2006-08 make it seem like there are fools out there who’ll still buy any old infamous bundle of overly complicated securities if the price is right. And that their content is irrelevant as long as somebody’s willing to buy them at above bargain basement prices — allowing them to be moved on at a profit.

      So let’s call them “toxic assets” instead. Because I did remember to bow my head when I read “the 1%.”

      The now “too big to fail” banks and financial houses are still making money off their toxic assets 3 and a 1/2 years after The Great Bailout of 2008. But the TBTFs” still aren’t required to account for them on balance sheets and income statements. Which means someone(s) somewhere is/are still selling part or all of some re-packaged moth-eaten securities every day.

      And since these debts were accrued in opaque, OTC markets — the only way anyone is ever going to find out just how “toxic” toxic assets really are is by auditing banks AROUND the auspices of the entire Federal Reserve system.

      That’s every Fed member bank in every branch of the Federal Reserve system. Meanwhile, the banks, brokerages and counter-parties — like AIG –have had Obama’s term-to-date in which to launder bundled securities.
      If you think this is far-fetched, companies like Krupp and Thyssen built up their financial empires in Wiemar Germany by borrowing worthless currency and commercial paper from the Bundesbank when Germany’s inflation rate stood at 23 million percent. This later paid off big time when the US bailed out the German economy at the end of 1923 with a $5 billion loan establishing the new :”reutenmark” to replace the mark. American banks extended Wiemar another $8 billion in credit — while coercing France and Germany to drastically reduce their war reparations claims on the German economy. Krupp and Thyssen only had to re-pay their loans with the same worthless paper they bought them with.

      Still, Germany got at least some “borrowed” prosperity from all this — despite having high public and private debts-to-GDP ratios to show for it — but the wheels in the factories and the trams in the coal and iron mines started to roll again. As did the railroads. Unemployment dropped to record post-war levels.

      So much good came out of Germany’s rescue “from communism” that one wonders if there really are such things as a “toxic” assets. Especially when they can still be used to launder money for re-investment elsewhere. Which will give incarcerated communists some work other than breaking rocks. And force the Mafia to check with Moody’s or Standard & Poor’s prior to loansharking.

      But my beef is really this: most folks think the Federal Reserve System was set up by Our Founding Fathers or by some (later) constitutional amendment. It wasn’t. Worse, federal law limits the Fed’s regulatory powers to: 1) ensuring uniform reserve requirements for member banks, 2) setting the overnight discount loan rates, and monitoring open-market operations like FOREX.

      It’s obviously not enough. If a central bank had had more regulatory power in the past — it wouldn’t have had to scramble hat-in-hand twice in 2008 to cook deals bailing out first Bear Stearns, then NOT bail out Lehman Brothers to avert a world-wide calamity.

  • Stellagh444

    Dear Mitt:

    As America’s favorite Agent Entrepreneur (that’s “self-made man” whose father was once Governor of Michigan) — your word is good enough for me. And if the upper 1% say they still need protection from needless taxation, well, I believe it.
    Especially since I won’t hear a real debate in 2012 about extending any or all of the Bush/Obama ultra-conservative tax policies. I’ve long since learned to live w/o honest debate on the campaign trail or discussed by America’s MSM pundits. And a candidate’s rise and fall in the polls based more on the time allotment given them in the news networks “Texas Death Match” weekly debates — rather than on either the style or substance of their platforms.

    So I wondered if what I wrote last week about toxic assets and their unabated underwriting regulations for trade and disposal — pre-2008 to present — was really true.

    How wrong could I be?

    Here’s a quote from Ben Protess writing for “DealB%k” about new 2012 regulations to shore up claims of shoddy past practices by institutions covered by SEC regulation:
    “Securities backed by toxic mortgages and other assets imploded during the financial crisis, costing investors billions of dollars. Investors, who are still shying away from the market, have complained that the banks didn’t disclose the risks, including the dubious quality of the underlying loans.

    Now, the S.E.C., hoping to bring more clarity to the market, is demanding more disclosure about the complex investments. The agency’s new regulations are part of its carrying out the Dodd-Frank financial overhaul law.

    One rule, which will take effect early next year, requires banks and other financial firms that issue asset-backed securities to review the quality of the underlying assets, including mortgages, credit card debt and student loans. The banks then must disclose their findings to investors. If the assessment shows that the underlying loans did not meet underwriting standards promised to investors, the banks must explain the discrepancy in a filing.

    “These rational measures are designed to help revitalize the important asset-backed securities market by encouraging better disclosure for investors,” Mary Schapiro, chairwoman of the S.E.C., said in a statement.” [DealB%k 01/20/11]

    I feel so much better now. After all, “disclosure” is so much better than “enforcement” “fine” or “imprisonment.” Of course, investors in stale, interest-accruing, “don’t forget abandoned properties in your prayers” bargain-hunting over at the OTC Caveat Emporium can be tough when the law is on their side. And can and will ask all the right questions to avoid any repeats of the ABS, MBS meltdown of 2006-8. At least until the remodeling of Alcatraz Island is completed late next year.

    And — no doubt — sellers of toxic assets will even let investors kick the tires of anything they buy by dutifully filing a soul-searching, honest appraisal in the rear window of the used asset in question. I just hope the filings that sellers make –admitting they’re basically a bunch of crooks — are a little less long-winded than I am.

    So — Mitt — why continue these ungodly tax cuts and estate tax abatements when you can just get a law passed to let the 1% crowd do their own self-assessment of the taxes they want to pay? No more of “that they ought to pay”stuff.

    It can all be explained in a filing.