Governor Romney’s Tax Plan Highlights Challenges of Meeting Key Revenue, Deficit, and Distributional Goals At the Same Time
Hard — If Not Impossible — to Cut Tax Rates This Deeply, Maintain the Current Low Rate on Capital Gains, Raise Current Levels of Revenue, and Maintain
Unveiling his new tax plan recently, Governor Romney’s campaign said it would: 1) permanently cut individual income tax rates by 20 percent below President Bush’s tax rate levels (with the top rate falling from 35 to 28 percent — in essence, making all of the Bush tax cuts permanent and adding substantial further tax rate cuts on top); 2) cut the top corporate tax rate by nearly 30 percent (from 35 to 25 percent); 3) repeal the estate tax; 4) kill the Alternative Minimum Tax; and 5) scale back “tax expenditures,”1 mainly for high-income people. It would, however, leave the biggest tax break for high-income households — the 15 percent tax rate on capital gains and dividends — untouched (while eliminating capital gains taxes altogether for people with incomes below $200,000). Governor Romney’s advisers said the plan also will preserve “revenue neutrality” and maintain the current degree of progressivity in the tax code.