The Loopholes & Giveaways Mitt Loves to Love
While much attention has focused on Mitt Romney’s own shockingly low tax rate — a 15 percent rate far lower than that paid by millions of middle class Americans, less attention has been paid to the details of his tax plan. It’s a plan that would slash taxes on the wealthiest Americans and corporations, while actually increasing taxes on the middle class. What’s more, as the Center for American Progress Action Fund’s Michael Linden and Seth Hanlon wrote last week:
Nowhere in Romney’s 59-point economic plan does he identify a single corporate loophole or tax break he’d eliminate.
Here’s a rundown of some of the most egregious tax loopholes and giveaways Mitt Romney preserves in his tax plan.
Mitt Romney’s TOP FIVE Tax Giveaways to the Wealthy
- 1. The ‘Carried Interest’ Handout to Hedge Fund & Private Equity Managers. Cost: $15 BILLION (Fiscal Years 2012-2012)
This is one of the unfair tax loopholes that Mitt Romney himself both supports and personally exploits in order lower his effective tax rate to 15 percent — an option “not available to the ordinary taxpayer.” Check out ThinkProgress Economy Editor Pat Garofalo’s recent column in the Atlantic for a complete explanation of how this egregious loophole works — and why it’s completely indefensible.
Yesterday, it emerged that Mitt Romney has millions or even tens of millions of dollars parked in widely known offshore tax havens like the Cayman Islands. The use of offshore tax havens to boost Bain Capital’s profits and Romney’s returns is legal; however, the tax revenue lost as a result forces larger deficits or deeper cuts to programs that benefit the middle class each and every day. This is yet another example of a tax avoidance scheme available to a small number of privileged Americans who are able to rig the game in their favor while the rest of us are left holding the bag.
- 3. Taxing Capital Gains at a Lower Rate Than Ordinary Income. Cost: $256 BILLION (Fiscal Years 2012-2016)
In addition to the special “carried interest” loophole (#1 above) that Romney uses to lower his tax rate, he also takes advantage of the fact that capital gains are currently taxed at 15 percent instead of the top rate margin income tax rate of 35 percent. The Center for American Progress’ Seth Hanlon explains: “Because capital gains are concentrated at the highest levels of income and taxed at favorable rates, many of the most affluent taxpayers pay a lower effective tax rate than those beneath them on the income scale.”
How concentrated are capital gains at the top end of the income scale, you ask? The wealthiest 0.1 Percent of Americans make an astounding HALF of all capital gains. As we’ve pointed out, Romney’s plan to cut capital gains tax for those making under $200,000 would offer exactly ZERO benefit to the 73.9 percent of the middle class who have no capital gains, a move the New York Times today likened to “tossing crumbs.”
As we explained yesterday, capital gains rates are due to increase next year with the expiration of the Bush tax cuts. Romney, however, would keep this unfairly low rate in place, which is a big part of why his tax plan would cut his own taxes by more than 40 percent.
- 4. Mortgage Interest Deduction on Second Homes & Yachts. Cost: $10 BILLION (Fiscal Years 2012-21)
While Mitt Romney doesn’t own a yacht, he and his wife do own multiple multi-million dollar homes. The mortgage interest tax deduction is meant to encourage home ownership, not enable the wealthiest Americans like Romney to lower their tax burden.
- 5. Failing to Limit ‘Upside Down’ Itemized Deductions That Favor the Wealthiest Americans. Cost: $114 BILLION (Fiscal Years 2012-2016)
Since we haven’t seen Mitt Romney’s tax returns, we don’t know what kind of deductions he takes. In any case, limiting itemized deductions for the wealthiest taxpayers to bring them in line with the tax benefits enjoyed by other taxpayers — as President Obama has proposed to do — would eliminate a source of considerable spending through the tax code (which is what these giveaways really are — spending by another name), freeing up resources that can be used much more effectively elsewhere.
As you can see, just these five giveaways to the wealthiest Americans that Mitt Romney supports add up to a considerable sum of money — money that could be much better spent on targeted tax cuts for the middle class or on programs and services that benefit a large number of Americans and help create an economy that works for everyone.
It’s important to remember that these wasteful giveaways don’t just enrich a small group of Americans at a rate wildly disproportionate to everyone else, the revenue lost as a result either adds to the deficit or puts Medicare, Medicaid, Social Security and programs and services that benefit all Americans on the chopping block instead — or both, in the case of Mitt Romney’s economic plan.
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