The fact that Mitt Romney’s tax plan is mathematically impossible was reinforced again on Friday, when Mark Zandi, a former John McCain campaign adviser and Chief Economist at Moody’s Economy, admitted as much.
Speaking on CNN’s “Starting Point,” Zandi acknowledged astudy by the Tax Policy Center that shows Romney’s plan to lower taxes by 20 percent across the board, while making up those losses in government revenue by closing loopholes on the wealthy, doesn’t add up. Zandi even went so far as to say that “the arithmetic doesn’t work as it is right now”:
ZANDI: Yeah, I think the Tax Policy Center study is the definitive study. They’re non-partisan, they’re very good. They say given the numbers that they’ve been provided by the Romney campaign, no, it will not add up. Now, the Romney campaign could adjust their plan. They could say okay I’m not going to lower tax rates as much as I’m saying right now and they could make the arithmetic work. But under the current plan, with the current numbers, no it doesn’t. I’ll say one other thing, though. I think it is important that we do focus on the so-called tax expenditures in the tax code. Those are the deductions, and credits, and loopholes in the code. We need to reduce those, because if we do we’re going to make the tax system fairer, easier to understand and ultimately lead to stronger growth. So that’s the right place to focus. But, no, the arithmetic doesn’t work as it is right now.
Watch it:
Closing all the loopholes and ending all of the deductions currently given to the wealthy does not make up for the losses of giving everyone in the country, particularly the wealthy, another tax break. The only way Romney’s plan will not add to the deficit is if middle class families pay over $2,000 more in taxes annually.
The non-partisan Tax Policy Center last month released a study showing that if Mitt Romney were to keep his promise to cut tax rates by 20 percent while still balancing the budget, he would have to raise taxes on middle class families by more than $2,000. The Romney campaign has disputed the study, saying that it will close enough loopholes to pay for its huge rate cut; however, it refuses to divulge one single loophole that would be on the chopping block.
Notably, the TPC study found that even if Romney eliminated every single loophole and deduction for wealthy taxpayers, he still couldn’t offset the revenue loss without raising taxes on the middle class. During an interview yesterday on NBC’s Meet The Press, Romney claimed that five other studies show that he could, in fact, accomplish all his budget goals:
GREGORY: So Governor, we talked last night about jobs and the economy and also the debt. And I want to begin there. You’ve called the debt and our deficit a moral crisis, and yet in addition to extending the Bush tax cuts, you want to cut tax rates an additional 20 percent. You’ve rejected a 10 to one spending ratio when it comes to spending to increasing taxes. And, yet, you want to balance the budget. The math simply doesn’t add up, does it?
MR. ROMNEY: Well, actually, it does. And the — the good news is that five different economic studies, including one at Harvard and Princeton and AEI and a couple at The Wall Street Journal all show that if we bring down our top rates and actually go across the board, bring down rates for everyone in America, but also limit deductions and exemptions for people at the high end, while you can keep the progressivity in the code, you could remain revenue neutral and you create an enormous incentive for growth in the economy.
The Romney camp hasn’t indicated exactly which fives studies their candidate was referencing, but it seems likely that they were the following. All they do is further prove that Romney would, in fact, have to raise taxes on the middle class if he were to keep his promise not to lose revenue with his tax rate reduction:
– Harvard Professor Martin Feldstein’s, which, as the Center for American Progress’ Seth Hanlon pointed out, didn’t take into account Romney’s corporate tax cut, redefined the middle class, and cherry picked numbers to overstate savings.
– Princeton Professor Harvey Rosen’s, which, as UC Berkeley economist Brad DeLong noted, says Romney’s tax cuts will cause economic growth that every other recent tax cut package has failed to deliver. “We simply do not see such supply responses in the historical record, do we?” DeLong asked.
– American Enterprise Institute’s Matt Jensen’s, who claimed that the TPC study did not take into account that Romney may eliminate “the exclusion ofinterest on state and local bonds and the exclusion of inside-buildup on life insurance vehicles.” TPC re-ran the numbers to include eliminating those deductions and found that “our main result still holds.” Another AEI tax expert said, “It’s not as if the entire philosophical approach [Romney's] pursuing is doomed…But he’s going to need to cut rates significantly less than 20 percent if he wants to honor his other goals.”
– A pair of Wall Street Journal editorials that add no newinformation and merely regurgitate right-wing talking points.
Since the TPC study first came out, the Romney campaign has flailed for a response. Romney’s effort on Meet the Press was certainly no better.
UPDATE
Feldstein is an official adviser for the Romney campaign, while Rosen worked in the administrations of both President George W. Bush and President George H.W. Bush.
The Romney campaign has so far refused to clarify which tax deductions and loopholes it would eliminate in order to make its huge proposed tax cut for the rich revenue neutral. Despite repeated requests, the campaign and candidate have refused to budge, content to say that the tax plan “can’t be scored” due to its lack of detail.
And even Fox News has apparently had it with the campaign’s consistent dodging of this question, as Fox’s Gregg Jarrett repeatedly asked Romney policy director Lanhee Chen about it during an interview on Friday:
JARRETT: He’s not saying which of the loopholes and deductions and credits and exemptions he wants to close. That is huge. That’s significant. How can he not tell the American people those facts?
CHEN: Well, let’s back up for a second. This is a race about two dramatically different philosophies. [...] As you’ve said, they’re going to get rid of some of this underbrush, some of the deductions and some of the exemptions that are clouding our tax code.
JARRETT: But why won’t he explain how and which ones and by how much?
CHEN: Well, you know, a number of different bipartisan commissions over the years have told us exactly how we get there. The key is presidential leadership and that’s something that’s been lacking. That’s something that Governor Mitt Romney is going to provide in the White House.
JARRETT: But Mr. Chen, forgive me, you’re just not answering my question. So let me put it again: which loopholes and deductions and credits and exemptions the President’s going to get rid of would affect all Americans. Before they cast their ballot, don’t they deserve to know which ones are going, which ones are not, and by how much?
CHEN: Look Greg, Governor Romney’s been very clear that first of all we’re going to look to curb deductions for high-income taxpayers. And secondly, a lot of different deductions and exemptions are out there, we’ve got a lot of different ways to get there.
Watch it:
According to the non-partisan Tax Policy Center, even assuming that Romney eliminates alldeductions and exemptions for high-income individuals, he would still have to raise middle-class taxes in order to pay for his tax plan. Romney, of course, is not going to completely eliminate all tax preferences enjoyed by the wealthy, so his plan will either raise middle-class taxes or bust the budget. And even Fox News, it seems, wants Romney to divulge the details sooner rather than later.
A recent analysis based on the loose outlines of Mitt Romney’s proposed tax plan — which would disproportionately benefit the wealthy and corporations — found that to remain revenue neutral, as Romney insists it will, it would have to raise taxes on middle- and lower-class families. The result, the Tax Policy Center concluded, is that middle class families would see a $2,000 tax hike, and that is based on the most generous assumptions, since Romney has yet to provide specific details of the plan.
In its analysis, TPC assumed Romney would pay for the corporate tax cuts by closing loopholes in the corporate tax code, but this week, the Romney campaign said that was not the case. Instead, the campaign told TPC that “cuts in corporate tax preferences were not meant to finance the initial rate cut to 25 percent but instead would pay for a subsequent revenue-neutral set of proposals that would reduce corporate rates further and enact a territorial system.”
By taking the corporate loopholes off the table, Romney is ensuring that middle class families will see an even larger tax hike than TPC previously assumed, as Center for American Progress Action Fund Director for Fiscal Reform Seth Hanlon noted in a column published today:
The TPC authors confirm that accounting for Romney’s unpaid-for corporate tax cuts would necessitate “even larger cuts to tax expenditures [i.e. tax breaks], and correspondingly larger increases in taxes on middle- and/or lower-income taxpayers,” than their original study found.
How big? The original TPC study found that in a single year, 2015, Romney’s plan would shift at least $86 billion of the tax burden from households with incomes over $200,000 to households with incomes below that level. TPC estimates that in the same year, Romney’s unpaid-for corporate tax cuts would cost $96 billion. Therefore, the tax increases on the middle class that TPC originally estimated – at least $2,000 for families and $500 for all taxpayers with incomes under $200,000 – would likely be around twice as much if Romney’s unpaid-for corporate tax cuts are taken into account.
That’s right: according to the TPC analysis — which, again, uses the most generous assumptions to fill in the blanks Romney left in the plan — the Romney plan would raise the average middle class family’s tax rate by as much as $4,000 to finance trillions of dollars in tax cuts for the rich and corporations. That includes the cost of a transition to a tax system that not only dramatically lowers the amount corporations will pay on domestic profits, but also the amount they pay on profits earned overseas and return to the U.S. — a system that will encourage outsourcing and further stashing of profits in offshore tax havens.
STAMFORD, Connecticut — US President Barack Obama joked Monday that his election foe Mitt Romney’s tax plans would rob from the middle class to help the rich — “like Robin Hood in reverse.”
Obama intensified his attacks on the Republican’s tax reform plans at a fundraising event in Connecticut, on a day when it was revealed his rival outraised him by $25 million last month in campaign fundraising.
“It’s like Robin Hood in reverse…. it’s Romney Hood,” Obama said, arguing that the middle class would bear the brunt of his opponent’s plans which he said would mostly benefit the wealthy.
“If this sounds like an idea that’s difficult to explain or sell to the American people, you would be right,” Obama said.
“They have tried to sell us this trickle down, tax cut fairy dust before.”
In a attack ad running in battleground states, Obama says Romney would hike taxes on families with children by $2,000 to pay for his $5 trillion tax plan that the Democrat incumbent says would mostly benefit the wealthy.
An independent panel affiliated with the Brookings Institution said last week that Romney’s plan to lower rates and maintain tax breaks would spell “large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.”
Romney has proposed cutting income tax rates by 20 percent, eliminating tax on investment income, eliminating the estate tax, and cutting the corporate tax rate.
To offset the $360 billion in lost revenues, the study said the government would be forced to end some tax benefits, a move that would proportionally hurt those with lower incomes.
Romney’s campaign dismissed the study, describing its authors as partisan and saying it considered only half of Romney’s tax platform.
The Republican presumptive nominee announced on Monday that he had raised $101 million dollars for his campaign in July, compared to Obama’s total of just over $75 million.
ORLANDO, Florida — President Barack Obama warned Thursday that Mitt Romney’s “fairy dust” tax cuts would swell his millionaire Republican foe’s personal wealth while sticking the middle class with the bill.
In a punchy new personal attack ad running in battleground states, the Obama camp said Romney would hike taxes on families with children by $2,000 to pay for his $5 trillion tax plan that would mostly benefit the wealthy.
“You work hard, stretch every penny,” the ad said, showing a picture of a man working at a desk and a woman comparing cans of tuna at a supermarket.
But chances are you pay a higher tax rate than him,” the sonorous voice of the narrator said, as a picture of a smiling Romney, a former venture capitalist, flashed on screen.
“Mitt Romney made $20 million in 2010 but paid only 14 percent in taxes — probably less than you,” the ad said, branding the former venture capitalist’s approach as “He pays less. You pay more.”
The video was prefaced by footage of Obama walking along a colonnade next to the White House Rose Garden, and a voice-over of the president saying: “I’m Barack Obama and I approve this message.”
The Obama camp is using Romney’s bank balance, as well as his refusal to release more than two years of tax returns and complicated offshore accounting arrangements to paint him as out of touch with the hard-pressed middle classes.
The new ad came on the eve of the release of new Labor Department employment figures, which, if poor, could boost Romney’s effort to savage Obama’s economic record and convince voters the president does not deserve a second term.
Obama based his assaults on a survey released by The Brookings Institution that said plans like Romney’s to lower rates and maintain tax breaks would spell “large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.”
“But chances are you pay a higher tax rate than him,” the sonorous voice of the narrator said, as a picture of a smiling Romney, a former venture capitalist, flashed on screen.
“Mitt Romney made $20 million in 2010 but paid only 14 percent in taxes — probably less than you,” the ad said, branding the former venture capitalist’s approach as “He pays less. You pay more.”
The video was prefaced by footage of Obama walking along a colonnade next to the White House Rose Garden, and a voice-over of the president saying: “I’m Barack Obama and I approve this message.”
The Obama camp is using Romney’s bank balance, as well as his refusal to release more than two years of tax returns and complicated offshore accounting arrangements to paint him as out of touch with the hard-pressed middle classes.
The new ad came on the eve of the release of new Labor Department employment figures, which, if poor, could boost Romney’s effort to savage Obama’s economic record and convince voters the president does not deserve a second term.
Obama based his assaults on a survey released by The Brookings Institution that said plans like Romney’s to lower rates and maintain tax breaks would spell “large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.”
And the president linked Romney’s plans to the policies of the former Bush administration, which he blamed for setting off the economic crisis in the first place.
“They have tried to sell us this trickle-down tax cut fairy dust before,” Obama said during a campaign swing to the battleground state of Florida.
“Guess what? It didn’t work then. It will not work now. It’s not a plan to create jobs. It is not a plan to reduce the deficit.”
The Romney campaign rejected Obama’s attack.
“Under President Obama, middle-class Americans have experienced higher unemployment, lower incomes and greater uncertainty about the future,” said Romney spokesman Ryan Williams.
“Now he is promising to raise taxes on millions of families and small businesses — which is the last thing we should do in a struggling economy. “Mitt Romney’s plan for a stronger middle class will cut tax rates across the board and result in more jobs, higher take-home pay, and the kind of economic growth we haven’t seen under President Obama.”
Romney has proposed cutting income tax rates by 20 percent, eliminating tax on investment income, getting rid of the estate tax and cutting the corporate tax rate.
The Republican’s campaign dismissed the tax study, describing its authors as partisan and saying it considered only half of Romney’s tax platform.
But the survey was prime ammunition for the Obama campaign’s contention that if elected, Romney would further tilt the economy toward wealthy Americans at the expense of middle class voters still suffering from the recession.
As Obama headed to Florida on Thursday, Democrats gleefully circulated a picture of the front page of the Tampa Bay Times newspaper bearing the headline: “Romney’s plan will hit middle class.”
Romney paid an effective tax rate of 13.9 percent in 2010, according to returns he has released, because his income from investments was taxed as a capital gain rather than under high rates due for salaried income.
Republicans have consistently denounced President Obama’s plan to allow the Bush tax cuts on income over $250,000 to expire at the end of the year. “We ought not raise taxes on anyone at the end of the year,” Senate Minority Leader Mitch McConnell (R-KY) has said of the Obama plan, which would raise taxes on roughly 2.1 million high-income earners (while still preserving a piece of the tax cut for them).
A new Senate GOP tax plan released by McConnell and Utah Sen. Orrin Hatch (R), however, raises taxes on nearly 10 times as many Americans by allowing certain tax breaks signed into law by President Obama expire at the end of the year. Putting an end to those three tax breaks — the Child Tax Credit, a tax break on college tuition, and a more generous Earned Income Tax Credit — would raise taxes on 20 million families, as shown by this chart from Seth Hanlon, the director of fiscal reform at the Center for American Progress:
According to Hanlon, 13.1 million families would see higher taxes if the enhancements to the Child Tax Credit and Earned Income Tax Credit are allowed to expire. Another 9.1 million benefited from the American Opportunity Tax Credit, a break on college tuition.
The Senate GOP claims it wants to prevent tax hikes on Americans at the end of the year. The McConnell-Hatch plan, however, is yet another example of the fact that the only tax hikes Republicans can stomach are those that only hit the poor.
The re-emerging right-wing myth that low-income Americans aren't paying their "fair share" in taxes relies on flawed data: a report from the Heritage Foundation highlighting the fact that nearly half of Americans pay no federal income tax. In fact, while nearly half of Americans pay little to no federal income tax, nearly three-quarters pay other federal taxes, and nearly all pay state and local taxes; Americans who pay neither income nor payroll taxes are seniors, students, people with disabilities, and others who are not part of the working population.
Conservative Media Hype Income Tax Number In A Call For "Fairness"
Fox's Jim Angle: "For Half Of The Working Population, 'Fair' Means Almost No Income Taxes At All." In a segment examining "fairness" in the tax code, Fox News chief Washington correspondent Jim Angle pointed to the fact that half of Americans pay little to no federal income taxes to criticize President Obama's call that the wealthy pay their fair share in taxes, saying that it "doesn't entirely fit with the call for fairness from the president and his aides." He added: "When the president talks about fairness, he's arguing the wealthy should pay more, not that everyone should pay something." [Fox News, Happening Now, 2/20/12]
Fox's Bret Baier: "Like Beauty, Fairness In Taxes Appears To Be Largely In The Eye Of The Beholder." Introducing a segment by Angle on Fox News' Special Report, anchor Bret Baier asked viewers whether they pay their "fair share" and said that "like beauty, fairness in taxes appears to be largely in the eye of the beholder." Angle went on to say that "the president's idea of fairness is that the wealthy should be more, not that everyone should pay something." [Fox News, Special Report, 2/20/12]
Fox Nation: "Percentage Of Americans Who Pay No Income Tax Hits 49.5..." In a post highlighting the Foundry's blog, the Fox Nation website linked to the post using the headline: "Percentage Of Americans Who Pay No Income Tax Hits 49.5...":
Big Government: "No Wonder Obama Is Being Called The 'Food Stamp President.'" In a post bearing the headline, "49.5% of Americans Pay No Federal Income Tax, Can Obama Get that Number to 51% by November?" that trumpeted Heritage's report, Andrew Breitbart's Big Government website blamed the increase on President Obama:
Under Barack Obama, the number of people not paying federal income taxes in America has officially hit 49.5%. That means almost half of America, or 151.7 million Americans, are enjoying privileges or living off benefits the other 50.5% pay for. What kind of benefits am I talking about? Almost every kind you think about.
[...]
No wonder Obama is being called the "food stamp president." [Big Government, 2/21/12]
Drudge Report: "Percentage Of Americans Who Pay No Tax Hits 49.5..." The Drudge Report linked to the Foundry's post with the headline: "Percentage of Americans who pay no tax hits 49.5...":
CBPP: Income Tax Number "Greatly Overstates The Share Of Households That Do Not Pay Any Federal Taxes." The Center on Budget and Policy Priorities wrote that the fact that nearly half of Americans don't pay any federal income tax "ignores the substantial amounts of other federal taxes -- especially the payroll tax -- that many of these households pay." CBPP continued: "As a result, it greatly overstates the share of households that do not pay any federal taxes. Data from the Urban Institute-Brookings Tax Policy Center show only about 14 percent of households paid neither federal income tax nor payroll tax in 2009, despite the high unemployment and temporary tax cuts that marked that year." [Center on Budget and Policy Priorities, 5/31/11]
CBPP: "86 Percent Of Working Households Pay More In Payroll Taxes Than In Federal Income Taxes." CBPP reported:
The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only one that matters. Some 86 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to just 1.6 percent for taxpayers in the top 1 percent of the income distribution.
CBPP: "The Poorest Fifth Of Households As A Group Paid An Average Of 4 Percent Of Their Incomes In Federal Taxes In 2007." CBPP reported that "low-income households as a whole do, in fact, pay federal taxes," writing:
Congressional Budget Office data show that the poorest fifth of households as a group paid an average of 4 percent of their incomes in federal taxes in 2007 (the latest year for which these data are available), not an insignificant amount given how modest these households' incomes are -- the poorest fifth of households had average income of $18,400 in 2007. [4] The next-to-the bottom fifth -- those with incomes between $20,500 and $34,300 in 2007 -- paid an average of 10 percent of their incomes in federal taxes.
Even these figures understate low-income households' total tax burden, because these households also pay substantial state and local taxes. Data from the Institute on Taxation and Economic Policy show that the poorest fifth of households paid a stunning 12.3 percent of their incomes in state and local taxes in 2010.
When all federal, state, and local taxes are taken into account, the bottom fifth of households paid 16.3 percent of their incomes in taxes, on average, in 2010. The second-poorest fifth paid 20.7 percent. [Center on Budget and Policy Priorities, 5/31/11]
Journalist David Cay Johnston: "When It Comes To State And Local Taxes, The Poor Bear A Heavier Burden Than The Rich In Every State Except Vermont." In an article outlining "a few points about taxes and the economy that you may not know," Reuters columnist David Cay Johnston, a former New York Times reporter who won the Pulitzer Prize for his reporting on the tax code, wrote:
Data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.
This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.
But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.
When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more. [Willamette Week, 4/13/11]
Johnston: Payroll Taxes "Are Paid Mostly By The Bottom 90 Percent Of Wage Earners." In his article on taxes and the economy, Johnston wrote:
Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That's because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800. [Willamette Week, 4/13/11]
CBPP: "Lower-Income Households Pay A Significantly Larger Share Of Their Incomes In Federal Excise Taxes" Than Do More Affluent Households. In a report on the taxes that low-income Americans pay, CBPP wrote:
The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only one that matters. Some 86 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to just 1.6 percent for taxpayers in the top 1 percent of the income distribution.
In addition, Congressional Budget Office data show that lower-income households pay a significantly larger share of their incomes in federal excise taxes (levied on goods such as gasoline) than middle- and upper-income households do.
When all federal taxes are considered, it is clear that the overwhelming majority of Americans pay such taxes. [Center on Budget and Policy Priorities, 5/31/11]
CBPP: "The Effective Federal Income Tax Rate For The 400 Taxpayers With The Very Highest Incomes Has Declined By Nearly Half Over The Past Two Decades." A February 23, 2010, report by the Center on Budget and Policy Priorities (CBPP) found:
The effective federal income tax rate for the 400 taxpayers with the very highest incomes has declined by nearly half over the past two decades, even as their pre-tax incomes have grown five times larger, new IRS data show.
The top 400 households paid 16.6 percent of their income in federal individual income taxes in 2007, down from 30 percent in 1995. This decline works out to a tax cut of $46 million per filer in 2007, or a total of $18 billion in tax cuts for these households per year. [Center on Budget and Policy Priorities, 2/23/10]
CBPP: "Typical Middle-Class Households Face Higher Tax Rates Than Some High-Income Households." A September 20 post on the CBPP blog, Off the Charts, showed that households with an annual income of over $1 million that earn over two-thirds of their income from investments paid a lower tax rate in 2011 than most middle-income families:
[Center on Budget and Policy Priorities, Off the Charts, 9/20/11]
Congressional Research Service: "About 25 Percent Of Millionaires In The U.S. Pay Federal Taxes At Lower Effective Rates Than A Significant Portion Of Middle-Income Taxpayers." An October 12 Bloomberg article on the recent Congressional Research Service report, "Analysis of the Buffet Rule," noted:
About 25 percent of millionaires in the U.S. pay federal taxes at lower effective rates than a significant portion of middle-income taxpayers, according to a legislative analysis.
Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million "moderate-income taxpayers," representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7.
The findings put the U.S. tax system in conflict with the so-called Buffett Rule, which says households making more than $1 million annually shouldn't pay a smaller share of their income in taxes than middle class families, says the report, which analyzed 2006 Internal Revenue Service data. [Bloomberg, 10/12/11; Congressional Research Service, 10/7/11]
For the truth about the historically low tax rates paid by the wealthiest Americans, click here
... While Their Income Has Risen By 256 Percent
CEPR Report Shows Income Of Top 1 Percent Increased 256 Percent From 1979-2006, While Lowest Quintile Saw Incomes Rise 11 Percent. From a December 2010 report released by the Center for Economic and Policy Research (CEPR):
[Center for Economic and Policy Research, December 2010]
And Most Americans Who Are Exempt From Paying Income Tax Are Not Part Of Working Population
CBPP: "Vast Majority" Of People Who Neither Pay Income Nor Payroll Taxes Are Seniors, Students, People With Disabilities, And Others. From CBPP:
Some have implied or suggested that people who do not owe federal income tax are "freeloaders" who don't have a "stake in the system" and that making them pay federal income taxes would improve the tax code. Yet the vast majority of the people who owe no federal income taxes fall into one of three categories:
Approximately 70 percent are working people who pay payroll taxes. As noted above, even the low-income households in this group pay substantial federal income taxes over time. The main options to force these people to pay federal income tax in years when their incomes are low include cutting the EITC or the Child Tax Credit, which would tend to reduce work incentives and increase child poverty and welfare use, and lowering the standard deduction or personal exemption, which could tax many low-income working families into, or deeper into, poverty.
An additional 17 percent of people who did not pay federal income taxes in 2009 are people aged 65 or older. The main option to make these individuals pay federal income tax would be to subject their Social Security benefits to taxation.
The remaining 13 percent consists largely of students, people with disabilities, the long-term unemployed, and others with very low taxable incomes.[19] To make these people pay federal income taxes, policymakers would have to tax disability, veterans', and similar benefits or make full-time students and the long-term jobless individuals borrow (or draw from any available savings) to pay taxes on their meager incomes.
Tax Policy Center: "Share Of People Who Don't Pay Income Taxes Will Likely Shrink"
Tax Policy Center: "When People's Incomes Decline So Too Does Their Income Tax."Responding to the income tax number, Tax Policy Center economist Howard Gleckman wrote that "rarely has a bit of data been so misunderstood, or so misused." He went on to explain:
So who are these folks who pay no federal income taxes? Mostly, they are people who don't make very much money. Many are elderly: Think a widow living only on Social Security benefits. Others are parents earning less than $20,000. Only about 5 percent are non-elderly households making more than $20,000.
It is no accident, btw, that the number of people not paying income tax was so high in 2009. You may have noticed that we've had a recession lately. And here is a powerful insight: When people's incomes decline so too does their income tax (at least most of the time). At the same time, many working families have benefited from temporary tax cuts aimed at boosting the economy, and as a result some did not pay income taxes last year. As the economy improves and those tax cuts expire, it should also be no surprise that the share of people who don't pay income taxes will likely shrink from half last year to less than 40 percent by 2012.
There is, however, another reason why some people don't pay. For decades, both Democratic and Republican governments have made conscious policy decisions to remove low-income working families from the income tax rolls. And, guess what, sometimes government policy works exactly as intended. That's what happened this time. [Tax Policy Center, 4/15/10]
Mitt Romney this week unveiled a new tax plan that includes a 20 percent reduction in all marginal income tax rates. Previously, Romney had said that he’s not concerned about the very rich and is “proposing no tax cuts for the rich.” But during this week’s GOP primary debate, he reneged on that position, saying, “number one, I said that we’re going to cut taxes on everyone across the country by 20 percent, including the top 1 percent.”
Romney’s new tax cut may reduce all tax rates by the same amount, but it gives most of its benefits to the already wealthy. The Tax Policy Center had modeled a 20 percent reduction in all income tax rates, and as this table shows, nearly half the benefit of such a cut would go to the richest 5 percent of Americans, with more than 25 percent of the benefit going to the richest 1 percent, compared with current policy.
Under the plan, someone in the richest 1 percent of Americans would receive a $60,000 tax cut, while someone in the richest 0.1 percent — those making $1.7 million or more — would receive a $264,000 tax cut.
This analysis actually understates how much of the benefit would go to the wealthy under Romney’s plan, because the TPC included in its model a 20 percent reduction in the Alternative Minimum Tax, whereas Romney would abolish the AMT completely. Meanwhile, Romney’s cuts would cost $10.7 trillion over ten years, four times the cost of the Bush tax cuts.
Romney insists that his tax cut will be deficit neutral, because of unspecified deductions and credits that he is going to eliminate. But as Prof. James Kwak noted, the math for Romneysimply doesn’t add up. So all he’s doing is promising a massive tax cut for the rich now, with some hand-waving about how he’d pay for it later.
