A recent report from the Tax Policy Center is showing that the Romney tax plan will result in an added tax burden on folks with the lowest incomes:
Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.
I haven’t read all of the report nor have I taken much time to study the plan offered by the Governor. However, the broad brush strokes seem to be that there would be a 20% reduction in the tax rate at all tax brackets. Further, Romney would broaden the base by eliminating deductions. Last, Romney claims that his policies would spark the economy into 4% growth as opposed to the anemic sub 2% that we’ve grown accustomed too.
It should be no secret that I’m a small tax small spend kinda guy. So I’m a little concerned that the main thrust is surrounding tax rates and not spending rates. Cutting taxes is fine, but unless we shrink government, we’re only left with larger deficits.
I’m also a big believer in the concept of the Laffer Curve. This is the idea that tax rates of 0% and 100% will result in the same amount of tax revenue. And that as tax rates increase from 0% more and more tax revenue will be generated until a peak is hit at which point any further increase in the tax rate will result in lower revenue. I think this is true. It’s important to emphasize the concept of both sides of the curve and I think that Romney may be forgetting the 0% side and arch of the philosophy.
I’m not so optimistic that we’re sitting on the exact right peak right now and that either a tax hike or a tax cut would reduce revenue. But I think there might be better ways to spur the economy without introducing tax cuts. For example, end this continued nonsense surrounding the extension of the Bush tax cuts. Make ’em permanent and move on. The taxes in Obamacare? Remove them too.
Right now, I think that tax certainty would be a sufficient spark to the economy and one that could generate the 4% growth Romney is targeting.
I’ll leave the discussion with one caveat. I think that we need to reduce our corporate tax so that we’re among the most competitive in the world in this space and not the worst in the world. Further, I would edit the code to say that all earnings realized in a foreign nation and taxed at the national rate can be brought to America without being subject to further American corporate taxes. It’s hard to defend the practice of taxing money earned in France, using French -ahem- roads and bridges and then taxing that money further for the construction of American roads and bridges.