For Immediate Release: September 10, 2012
Contact: Anne Singer, 202-299-1066, ext. 27
Romney’s Bad Arithmetic: CTJ Report Disproves Claim that Romney Won’t Lower Taxes for the Rich
Washington, DC – On Sunday, September 9, presidential candidate Mitt Romney appeared with David Gregory on NBC’s “Meet the Press” and discussed his tax plan, which his campaign website explains would extend the Bush tax cuts, lower all income tax rates by a fifth, and introduce additional tax breaks. Romney claimed that his tax plan would not result in lower taxes for the rich because it would eliminate loopholes that currently reduce the tax bills of the rich. But Romney refused to identify those tax loopholes, or “tax expenditures” as they are often called, that he would eliminate.
“Well, I can tell you that people at the high end, high-income taxpayers, are going to have fewer deductions and exemptions,” Romney told Gregory. “Those numbers are going to come down. Otherwise they’d get a tax break. And I want to make sure people understand, despite what the Democrats said at their convention, I am not reducing taxes on high income taxpayers.” He also said that, “[w]e’re not going to have high-income people pay less of the tax burden than they pay today.”
“The question is not whether the rich will get a tax cut under Romney’s plan,” said CTJ director Robert S. McIntyre. “The question is how big the break for the richest Americans will be. We estimate that millionaires would get somewhere between $250,000 and $400,000 on average in 2013 if the plan was in effect then, no matter how Romney fills in the gaps – which are many.”
A recent CTJ report concluded that if Romney’s plan was in effect next year, people making over $1 million would get an average tax cut of $250,000 even if these wealthy taxpayers have to give up all of the tax loopholes or tax expenditures that Romney has put on the table. (This average break of $250,000 includes about $146,000 that millionaires would receive on average if Congress extended the Bush tax cuts in effect today but made no other changes.)
In other words, for very high-income taxpayers, the value of the tax rate reductions and other new breaks spelled out in Romney’s plan far outweigh the value of all of their tax loopholes and tax expenditures – meaning it would be impossible for Romney to implement his plan without lowering their taxes substantially.
The CTJ report also found that if Romney implemented his plan without touching tax loopholes or tax expenditures, then people who make over $1 million would receive an average tax cut of $400,000. This scenario seems very possible given that Romney has failed to specify a single tax loophole or tax expenditure that he would reduce or eliminate.
The Tax Loopholes Romney Took Off the Table Are the Most Targeted to the Rich
As the CTJ report explains, millionaires would not get such a large tax break under Romney’s plan if he eliminated the many tax loopholes and tax expenditures for investment income in the tax code – but Romney has taken these off the table. For example, the special break for capital gains and stock dividends mostly benefits the richest one percent of taxpayers, but Romney’s campaign website says that his plan would “maintain current tax rates on interest, dividends, and capital gains.”
Meanwhile, Romney’s running mate, Congressman Paul Ryan, told George Stephanopoulos on ABC’s “This Week” that most tax loopholes go to the rich, ignoring the fact that he and Romney have pledged to keep the main tax loophole for the rich, the preferential rates for capital gains and stock dividends.
“Now the question is not necessarily what loopholes go,” Ryan said “but who gets them. High income earners use most of the loopholes. That means they can shelter their income from taxation.”
Actually, the capital gains and dividends break provides the most widely-used tax shelters for the rich, including the technique by which Mitt Romney and other private equity fund managers characterize their compensation as “carried interest,” which they claim is a type of capital gains, in order to cut their tax rate by more than half.
In October of 2011, CTJ director Robert S. McIntyre was the first observer to calculate that Romney’s tax rate was likely about 14 percent because most of his income is characterized as capital gains using the loophole for “carried interest.”
By leaving in place the lower rates for capital gains and stock dividends, Romney’s plan would leave in place the existing incentives to engage in these types of tax shelters.
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Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation (www.ctj.org).