Washington, D.C. — Today, the Center for American Progress Action Fund released an analysis finding that former Massachusetts Gov. Mitt Romney’s second tax reform plan, unveiled in Arizona yesterday, will actually reduce federal tax revenues by more than $10.7 trillion from 2013 through 2022, compared to what the government would raise under current laws. Compared to current tax policies, such as extending the Bush tax cuts, Romney’s proposals would cost about $6.2 trillion more over that same time period.
The magnitude of revenue loss is such that, even with the draconian cuts required by Romney’s proposed spending cap, deficits would remain high—at about 5 percent of gross domestic product—and debt, as a share of GDP, would continue to rise, surpassing 90 percent by 2022.
“The enormity of these tax cuts is mind-boggling,” said Michael Linden author of the analysis and Director of Tax and Budget Policy at the Center for American Progress Action Fund. “Even more unbelievable is how skewed they are to those at the very top of the income ladder.”
The analysis outlines the following revenue implications of Romney’s proposal:
- Extend all the Bush tax cuts. Romney’s tax proposal starts from the assumption that the Bush tax cuts—currently set to expire at the end of this year—are permanently extended. Maintaining those rates and other cuts would cost the federal government $2.8 trillion over the next 10 years.
- Repeal the alternative minimum tax. The alternative minimum tax is supposed to prevent high-income individuals from using deductions and special tax breaks to reduce their taxable income too much. But because the tax’s income thresholds are not indexed to inflation, it is scheduled to affect more and more middle-class families over time. Most tax reform proposals include a fix for the alternative minimum tax that would index it to inflation and thus restore the tax to its original purpose. Romney’s proposal, however, is to eliminate the tax entirely. According to the Tax Policy Center, abolishing the tax will cost $2.5 trillion between 2013 and 2022.
- Cut income tax rates by 20 percent across the board. After cutting revenues by more than $5 trillion, Romney would add another massive cut by reducing income tax rates across the board. The top income tax rate would be reduced by 7 percentage points. The lowest income tax rate would be reduced by 2 percentage points. As with most of Romney’s proposals, this cut would disproportionately benefit the wealthy. It would also cost approximately $3.3 trillion in lost revenue through 2022.
- Repeal the estate tax. As with his original proposal, Romney’s new tax plan would eliminate the estate tax entirely. This costs about $200 billion more than the cost of extending the weaker version of the estate tax embedded in the Bush tax cuts.
- Repeal the Affordable Care Act. Contrary to conservative rhetoric, the Affordable Care Act does not add to the deficit. The reason it does not add to the deficit is because it was paid for, in part, by higher taxes on wealthy individuals and by fees from health care providers. Romney’s plan is to repeal these taxes and fees at a cost of more than $900 billion from 2012 through 2022.
- Reduce the corporate income tax rate to 25 percent. This proposal is also a holdover from Romney’s previous plan. Reducing the corporate rate in isolation would reduce federal revenues by more than $900 billion.
Read the analysis: The Revenue and Budget Implications of Romney’s New Tax Plan: His Proposals Would Result in an Unsustainable Budget
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