Mitt Romney’s tax plan would offer big cuts to millionaires, raise taxes on middle class, Brookings analysts say
Mitt Romney’s tax plan would provide large tax cuts to wealthy Americans and hike taxes on middle- and low-income households, according to an analysis by The Brookings Institution .
The report published Wednesday estimated households with incomes over $1 million would receive average tax cuts of $87,117 under Romney’s plan, while those earning $200,000 or less would pay higher taxes.
Brookings analysts concluded Romney’s plan favors high earners “even when we bias our assumptions about which and whose tax expenditures are reduced to make the resulting tax system as progressive as possible.”
“For instance,” analysts said, “even when we assume that tax breaks -- like the charitable deduction, mortgage interest deduction, and the exclusion for health insurance -- are completely eliminated for higher-income households first, and only then reduced as necessary for other households to achieve overall revenue-neutrality, the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households.”
The Romney campaign dismissed the report as a “liberal” study.
“President Obama continues to tout liberal studies calling for more tax hikes and more government spending,” Romney spokesman Ryan Williams said. “We’ve been down that road before -- and it’s led us to 41 straight months of unemployment above 8 percent. It’s clear that the only plan President Obama has is more of the same. Mitt Romney believes that lower tax rates and less government will jump-start the economy and create jobs.”
The analysis was conducted by three Brookings economists, including William G. Gale, an economic adviser to President George H. W. Bush, and Adam Looney, who served in Obama’s Council of Economic Advisers.
The economists determined Romney’s tax plan -- which includes extending all Bush-era tax cuts, slashing all income tax rates by a fifth and reducing the corporate tax rate to 25 percent -- would reduce federal revenues by $456 billion in 2015.
Romney has not specified how he would compensate for the sweeping tax cuts. But making up for the lost revenue, Brookings analysts said, “necessitates a reduction of roughly 65 percent of available tax expenditures.”
“Such a reduction by itself would be unprecedented,” Brookings reported, “and would require deep reductions in many popular tax benefits, ranging from the mortgage interest deduction, the exclusion for employer-provided health insurance, the deduction for charitable contributions, and benefits for low- and middle-income families and children like the [earned income tax credit] and child tax credit.”
Also Wednesday, President Obama’s reelection campaign released its own report attacking Romney’s tax plan.
Obama has proposed extending the Bush tax cuts for households making $250,000 or less, while allowing cuts for higher earners to expire at the end of the year. His campaign estimates the extension would prevent an average tax hike of $2,200 on 2.5 million Massachusetts families.
If Romney reduced or eliminated the mortgage interest deduction or the charitable deduction -- as the Brookings study suggested he might, to make his plan revenue-neutral -- about 700,000 Massachusetts households would lose those tax breaks, the Obama campaign estimated.
Romney’s campaign countered by pointing to an earlier study by Ernst & Young that estimated Obama’s plan to raise taxes on high earners would subject 2.1 million small businesses to higher taxes and prompt them to cut 710,000 jobs and to trim wages by 1.8 percent.Callum Borchers can be reached at firstname.lastname@example.org. Follow him on Twitter @callumborchers.