Mitt Romney claims he is going to cut taxes for the rich from 35% marginal tax rates to 28%. He claims that he would eliminate deductions in order to make this a net break even. In other words – he says that by eliminating deductions – these rich people will pay the same effective tax rate even though their marginal rates are lower than they were before. But there is only one problem - it is mathematically IMPOSSIBLE to do what they are claiming they want to do.
And that’s why the Romney surrogate is unable to answer this question. As we shared HERE – Paul Ryan couldn’t answer this question during a softball Fox News interview and he is supposed to be the conservative #’s guy. Below are a list of all the tax expenditures (deductions) that Americans get to “write off” during their taxes.
So a rich person may have a marginal rate of 35% for regular income but after all of their tax deductions below … they may only need to pay 25%. That’s how our tax code works. The Romney campaign will not say which of these they will cut in order to meet the standard they have set of cutting marginal rates but not reducing the actual tax rate paid for the rich. But as I said before – it is mathematically IMPOSSIBLE to do what they say because even if you eliminate every single one of these tax expenditures for the wealthy below … even if the rich get ZERO deductions … the rich would still average out with a tax cut when it is all said and done because the amount being cut in the marginal rate is greater than the number of deductions being taken away.
The non-partisan Tax Policy Center put out a new report HERE concluding this and more:
They say unless you raise taxes on the middle class – the government will take in $360 billion less in revenues in 2015. And those tax cuts that are unpaid for would go predominantly towards the wealthy.
Absent any base broadening, the proposed reductions in individual and estate taxes specified in Governor Romney’s plan would decrease federal tax revenues by $360 billion in 2015.7 These tax cuts predominantly favor upper-income taxpayers: Taxpayers with incomes over $1 million would see their after-tax income increased by 8.3 percent (an average tax cut of about $175,000).
They say trying to make up for the $360 billion in lower revenues each year would result in removing 65% of deductions which would have a TREMENDOUS impact on the middle class.
Offsetting the $360 billion in revenue losses necessitates a reduction of roughly 65 percent of available tax expenditures. Such a reduction by itself would be unprecedented, and would require deep reductions in many popular tax benefits ranging from the mortgage interest deduction, the exclusion for employer-provided health insurance, the deduction for charitable contributions, and benefits for low- and middle-income families and children like the EITC and child tax credit.
They say it is mathematically impossible to do what the Romney administration says it can do.
As a result, maintaining revenue neutrality mathematically necessitates a shift in the tax burden of at least $86 billion away from high-income taxpayers onto lower- and middle-income taxpayers. This is true even under the assumption that the maximum amount of revenue possible is obtained from cutting tax expenditures for high-income households.
And this is where the Obama concluded the Romney plan would raise taxes by an average of $2,000 more per year for the middle class.
if tax expenditures were completely eliminated for households above $200,000 and reduced across-the-board by 58 percent for taxpayers below $200,000 then taxpayers with children who make less than $200,000 would pay, on average, $2,000 more in taxes, whereas taxpayers without children who make less than $200,000 would receive a small tax cut of, on average, $75.
From the interview:
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.
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