Monday, April 30, 2012
Romney's tax agenda is ambitious. According to his campaign documents, he would extend the Bush tax cuts across the board (if they aren't already extended for him in the lame-duck session). Then he would add tax cuts that include a 20% cut in all individual income tax rates; elimination of all tax on interest, dividends, and capital gains for households with incomes below $200,000; elimination of the estate tax; repeal of the alternative minimum tax; and a reduction of the corporate rate to 25%. Because he would also repeal the Patient Protection and Affordable Care Act, Romney would eliminate that act's 3.8% tax on investment income of high-income individual taxpayers and the 0.9% tax on wages that is scheduled to take effect in 2013. The Romney campaign says eliminating tax benefits will offset the cost of these tax cuts, but it has not specified what tax benefits it intends to cut.
The price tag for the tax cuts is staggering. According to the Urban-Brookings Tax Policy Center, assuming the extension of the Bush tax cuts is already included in the baseline, the reduction in revenue would be $480 billion for 2015. That's about 3% of GDP.
There would have to be a lot of tax expenditure cuts to pay for that. The individual base broadening would have to be on a much grander scale than anything that was done under the Tax Reform Act of 1986. As noted, Romney needs $480 billion in 2015 alone. Table 1 shows revenue estimates for the largest tax expenditures Romney might conceivably consider (that is, excluding tax expenditures for investment income).
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