The Case for a New President: $2,000 Middle Class Tax Hike Lie
‘Lie’ and ‘lying’ are very strong words. We use them very reluctantly. But our president has grown very comfortable using them, particularly as part of his effort to cover up his poor performance during last week’s debate.
It’s becoming very difficult to avoid political ads if you watch any television at all. Retro TV and some other cable channels still provide a refuge, but most of us have seen the Obama for President ad that claims Mitt Romney supports big tax cuts for millionaires and a $2,000 tax hike for the middle class. This ad earns the ‘lie’ designation.
This ‘lie’ started with Elizabeth Warren at the Democratic National Convention. She is the white woman who claimed Native American heritage and became Harvard’s first ‘Native American’ law professor and ultimately its first minority tenured law professor. Warren is running for a U.S. Senate seat from Massachusetts. She said Romney’s tax plan will “hammer them (middle-class families) with a new tax hike of up to $2,000.”
First, this ‘lie’ doesn’t even pass the ‘smell test.’ Such a proposal would be political suicide – middle class voters far out number millionaires even using Obama’s $250,000 a year threshold. Neither Romney nor the Congressional majority required to enact such a plan are that stupid. This ‘lie’ is a concerted effort to deflect attention away from the incumbent’s miserable record on jobs and incomes. It’s also based on the premise that if something is repeated often enough, voters will believe it. Unfortunately, there’s some evidence that it’s working.
So what is Romney’s plan. He has proposed reducing statutory personal income tax rates 20 percent, from 10, 15, 25, 28, 33 and 35 percent to 8, 12, 20, 22.4 and 28 percent. It’s important to remember that a significant portion of households don’t pay any federal income tax. According to the Tax Policy Center, 46.4 percent of all households didn’t pay federal income tax in 2011.
Yes, about 60 percent of those households did pay payroll taxes for Social Security and Medicare, but their earnings didn’t trigger the federal income tax, primarily due to previous tax cuts championed by Republicans. Nevertheless, 19 percent of all households paid no federal income or payroll taxes last year. The most recent Internal Revenue Service statistics (2009) show that the top one percentile of adjusted gross income (AGI) – $343,927 plus AGI – paid 36.73 of all federal personal income tax. The bottom 50 percent of AGI – less than $32,396 AGI – paid 2.25 percent of all federal personal income tax.
Romney’s plan includes reducing the corporate income tax rate from 35 percent to 25 percent. A recent rate reduction in Japan has left the U.S. with the highest corporate tax rate for a major economy. The estate tax, which can force survivors to sell farms and businesses to pay the tax, would also be repealed. Romney plans to offset the rate reductions by eliminating or reducing the thousands of special provisions in our now mammoth federal tax code that force many of us to hire professionals just to file our taxes.
These credits, deductions and exclusions create complexity, confusion and compliance issues, often favoring special interests. For example, very cost inefficient solar arrays and windmills are being built throughout the country thanks to a 30 percent investment tax credit and bonus depreciation benefiting primarily the wealthy, and renewable energy credits that raise the cost of everybody else’s electricity. They are tax-favored, not productive investments.
Romney’s objective is to make the income tax rate cuts revenue-neutral – the amount of taxes collected would not increase or decrease. Ultimately, tax collections would increase as the lower rates, a much simpler tax code, and continued preferences for saving and investment get our economy growing again. Growth creates more jobs and higher paying ones.
Contrast that with Obama’s insistence on major tax increases next year on W-2 income and investment income for his $200,000 (single) and $250,000 (family) ‘millionaires.’ His ‘millionaire’ tax would hit tens of thousands of Subchapter S corporations (business income flows through to personal returns) particularly hard. Cutting or wiping out their profits severely handicaps America’s major job creators. Unprofitable and marginally profitable businesses can’t increase pay or benefits, hire more employees, nor expand or invest in new products or services. Eventually, they die or fade away.
Romney recently summed up his tax reform objectives on Meet the Press: “Bring our rates down to encourage growth, keep revenue up limiting deductions and exemptions, and make sure we don’t put any bigger burden on middle income people.”
That’s not a middle class tax increase and to call it one is a blatant lie!