MITT'S TAX PLAN

Last week all the BUZZ was about Herman Cain’s gimmicky 9-9-9 tax plan, allegedly based either on a video game or the fact that the price of a Godfather’s Pizza is $9.99.  But what do the other Republican candidates have to say about taxes?

Mitt Romney’s “plan” is outlined in “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth”, a 150+ page campaign tome that I expect boils down to maybe 10 pages of substantive content, if that much.

According to the “plan” –

“Mitt Romney will push for a fundamental redesign of our tax system.  He recognizes that we need to simplify the system.  He also recognizes that we need both to lower rates and to broaden the tax base so that taxation becomes an instrument for promoting economic growth.  We also need to find a way to keep the tax structure stable so that investors and entrepreneurs are not confronted with a constantly shifting set of rules that makes it impossible for them to plan ahead.”

For individual federal income taxes Romney wants to

·         “Maintain Low Marginal Rates” by not letting the “Bush tax cuts” expire;

·         “Further Reduce Taxes on Savings and Investment” by maintaining the lower capital gain tax rates and “eliminat(ing) taxation on capital gains, dividends, and interest for any taxpayer with an adjusted gross income of under $200,000”;
 
·         “Eliminate the Death Tax”; and
 
·         As a long-term goal “Pursue a Fairer, Flatter, Simpler Tax Structure”, using the Bowles-Simpson Commission as a starting point.

The Bowles-Simpson Commission was BO’s National Commission on Fiscal Responsibility and Reform’s which issued a report titled “The Moment of Truth” last December.  This report was basically ignored, and has joined the earlier one from a tax reform panel established by Dubya gathering dust on a shelf in some government library – despite some good serious work by its writers.

As I described when writing about the report last December (see “The Moment of Truth”) –

“As discussed in the initial draft report, the Commission recommends we use ‘zero-base budgeting’ by ‘eliminating all income tax expenditures’. Basically we would begin with no exemptions, deductions or credits. Congress and the President would then ‘decide which tax expenditures to include in the tax code in smaller and more targeted form than under current law, recognizing that any add-backs will raise rates’.”

See my post for more details on the report’s “illustrative proposal”.

Why must a “fairer, flatter, simpler tax structure” be a “long-term goal”?  What about a major goal for 2013?  Romney’s plan does say, “the entire tax code is in dire need of a fundamental overhaul” – so why wait?

While I support a lower tax on capital gains, but not on dividends and interest (as for dividends I would do away with “double taxation” by allowing a “dividends paid deduction” for corporations), I do not support a “0” tax rate.  Romney wants the “0” tax rate on capital gains, dividends and interest for the “Middle Class” to help “Americans to prepare for retirement and enjoy the freedom that accompanies financial security”.  A better way to do this is to encourage retirement savings by providing more incentives for investing in a ROTH IRA or ROTH employer plan or creating some kind of Universal Savings Account.

And, although I am not a fan of the federal estate tax, I do not want to ever lose (or at leastfor the next 10 years while I am still preparing returns) the “stepped-up basis” for inherited property.

While Romney’s immediate tax plan for individuals is basically extend the “Bush tax cuts”, exclude tax capital gains, dividends and interest from taxation for those with AGIs of under $200,000, and eliminate the “death tax”, which is not much, I will give him credit for calling for a “fairer, flatter, simpler tax structure”.

But it seems that everyone agrees “the entire tax code is in dire need of a fundamental overhaul” – yet nobody is in a hurry to really do anything about it.

TTFN