I make a habit of not posting political comments online, but I find it irritating that so much of the debates have been about tax plans and the media does everyone a disservice by not puting an impartial economist or tax advisor on to explain what is being discussed so I think it is a great and fair question to ask. I can't tell you if Romney's plan would be revenue positive, neutral (it is designed to be neutral) or negative, but we know a few things. First, tax cuts historically improve GDP as GDP improves more cash goes through the system to be taxed. Secondly, lower taxes means lower costs of capital for businesses which promotes growth and again, more cash flowing through the tax system. On the flip side, tax increases would reduce the already stagnent GDP growth. What does a 20% cut mean? I don't care what the rate is on the tax table, very little income taxes, if any, are paid by a majority of the so-called "taxpayers". A 20% reduction from zero is still zero, so we are really only talking about the people in the higher brackets that pay something more than a nominal amount of taxes. When Romney says 20%, I assume he means off of current rates, so that means the 35% becomes 28% (if he means the rates after Bush tax cuts expire the result is 31.7%). According to Obama, the "rich people" aren't paying anywhere near 28% so how can there be a $5 trillion effect? Romney's proposal is to cut out the deductions and/or limit to a basket. I personally don't like the basket idea as it would apply to charitable contributions from what I heard. Why is Romney's tax rate so low (more on that below), well when you give millions of dollars a year to charitable causes it brings down your tax rate. If Romney only was able to deduct $25k of his millions of charitable donations, he would be paying tremendously more taxes even though his applicable marginal rate would be lower. That is a simplistic example of how you can have higher revenue with lower rates. Just a few responses to some of the above- Regarding Bowles - Simpson, Bowles spoke of the problems of "Obamacare" and the harmful economic impact. I'm also pretty sure that Bowles Simpson recommended a top tax rate of 28% - sure sounds like what Romney is saying (yes i know there is different treatment of capital gains and dividends). Regarding a flat tax, every high earner would love that idea, but as we know, the majority pays little or no federal income taxes so that would be an exponential tax increase to many people. Quickly on Romney's taxes and the myth that "rich people" don't pay their "fair share". To me, taxes paid are taxes paid whether they are paid out of my checking account or borne by a company i own. Romney's federal tax rate is low because (i) he gives a lot of money to charity (ii) he pays a lot of state income taxes (which are generally deductible on a federal return) and (iii) his income is derived mostly from investments. The thing about (iii) is that when he picks up that income on his return it is the second time that the same earnings are being taxed. If you only apply (i) and (ii), Romney is walking away with a little more than 60% of what he makes, add in the fact that most of his taxable earnings in (iii) are subject to corporate income taxes, a rough guess is that he is walking away with about 50% of his true "income". The biased media distorts these facts and it is frankly too complicated to explain the numbers in a soundbite without losing everyone's attention. The idea that weathy people are getting lower rates than middle class is a myth and frankly populist class warfare - it is only possible where double taxation has already occurred. No one should be fooled into thinking that the truely wealthy (I mean wealthy, not someone who just happens to have a good job as is how "rich" has now been defined) will really be significantly captured by tax increases - they will restructure tax free portfolios, engage in tax free real estate investing etc... the higher the tax the more steps they will take to save. I happen to agree that tax revenue needs to increase so as to stop kicking the can of debt down the road, but talk of percentages ignores realities of fairness.Tax arguments in percentages ignores that $1.9 million is a lot more than $10k but can be distorted when $1.9 million is 14% and $10k is 20%. Everyone wants to talk percentages, but I'd like to see the President go around a room and point to people "you will pay zero, that guy will pay $2,000 and you in the back you should pay $100,000 even though you all got here on the same road and use the same resources". Taxes can't be equitable because the ability to pay is different and the money is needed, but class warefare is a damgerous road to take. PS - next time someone talks about the "fat cats" deducting their jets, just remember it was Obama's stimulus that let that occur. That's my 2 cents, soon to be taxed at 43%.
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Originally Posted by GBMelBlount
