Mitt Romney’s tax plan calls for a 20% decrease in tax rates across the board! And political pundits across the nation have been asking for details how we can afford to give away $5,000,000,000 of tax receipts. The Romney campaign insists the changes will be “revenue neutral” and the way they are going to pull that off is to close “tax loop holes.”
Well, everybody should be in favor of closing “tax loopholes” and in favor of a tax cut, so this should be a net winner, right?
Not if you can do the math.
The key words are that the 20% reduction is in “tax rates”! This is the key to this redistribution scam. Here are the 2012 Income Tax Brackets
10% is the tax rate for the first $0 – $8,700 of income, then
15% for income between $8,701 – $35,350
25% for income between $35,351 – $85,650
28% for income between $85,651 – $178,650
33% for income between $178,651 – $388,350
35% for income over $388,351
Let me estimate that the bulk of your earnings (after deductions) are taxed at the 15% rate or the 25% rate; that should cover most of the middle class.
The “fair sounding” 20% deduction in rates, lowers the tax rates thus:
10% becomes 8%
15% becomes 12%
25% becomes 20%
…
35% becomes 28%
So the poorest see their tax rate drop 2% but the richest see their rate drop 7%. So, here’s the deal: would you rather have 2% of a paltry sum or 7% of millions and millions and millions of dollars?
Uh huh, the fat cats are getting a much bigger tax cut than are regular folks.
Would you rather have 2% of a paltry sum or 7% of millions and millions and millions of dollars?
To pay for this, certain “tax loopholes” have to be closed. When people think of tax loopholes they think of corporation’s and rich people’s special laws that give them special privileges, like the “carried interest” rule that allows people like Mitt Romney to pay a much smaller percent of his income in tax than you or I do.
But that is not what they are talking about here. Romney is talking about “loopholes” like your mortgage interest deduction and the college expenses deduction, and for charitable donations, and the deduction for having paid state and local taxes. These are things that don’t quite seem like “loopholes” to most folks. So, the Romney plan takes away with one hand that the other hand gave.
But wait . . . there’s more!
Think about what the mortgage interest deduction means to someone in the middle class. If you were paying $2000 per month on a mortgage, that would allow you to deduct most of $24,000 from your annual income. This is a whopping big tax savings for us. And a whopping big loss if we no longer can deduct that.
But Romney’s class of people? How much do they pay in mortgage interest? (On just their primary residence, not their “vacation homes.”) Let’s say they pay $20,000 per month for a total deduction of much of $240,000 for the year. How much of a dent does that make in someone’s “adjusted gross income” when they are making $15-20 million a year? Not very much.
So, when the mortgage interest deduction (and the others) go “bye-bye” under Romney’s plan the rich will give back very little, while reaping huge benefits. The middle class will see the taxes they pay go up while the rich’s taxes go way down. Mitt Romney is ostensibly against “redistribution of wealth” but not, apparently, when it is in his favor.
And that’s not all! (Must be watching too much TV.)
Mr. Romney’s tax plan includes doing away with capital gains taxes. Capital gains taxes are the taxes one pays on earnings made from investing one’s money. What, you’ve never paid capital gains taxes? Gosh, could it be because you don’t have millions and millions of dollars in Cayman Island accounts to invest?
If capital gains taxes go to zero, Mitt Romney’s federal tax rate goes from 13-14% to approximately 0%. This change is needed apparently because money earned by investing one’s wealth is more honorable than the money you earn by the sweat of your brow or dint of your imagination. WTF? There used to be a principle in this country that capital gains shouldn’t be taxed any lower than ordinary wages as no effort was made in earning them. So much for that. They will claim that the tax reduction will allow more capital to be invested, which will grow the economy. Right. The rich have been harvesting money like it was corn for 20 years and do you see more capital investment? U.S. businesses are sitting on over $2,000 billion dollars of cash. Do you see them hiring folks? Do these cockamamie ideas ever get challenged?
Couple this with the fact that the bulk of “payroll taxes” (basically for Unemployment Insurance, Social Security, and Medicare) are capped at $111,000 of income, which means if you make over that amount, you stop paying them. Let’s see. Given Romney’s 2011 income of about $14 million, he would have stopped paying payroll taxes on . . . (wait for it) . . . January 4th, 2011 . . . if he actually were being paid that money as wages, which he was not. The Medicare and SS parts of the payroll tax constitute a flat tax of about 7% on your earnings, which added to the effective tax rate you pay via income taxes of roughly 13-14%, you are paying roughly 20% in federal taxes while Romney and his gang are paying at about a 9-12% rate. And even this is just too much for the monied interests of this country, they want their taxes to go down and yours to go up. After all money is power (and free speech) and they were born to wield power and you were not.
So, instead of waiting for Romney to supply his math, I have applied my own. After all it is simple arithmetic. Simple enough that even greedy effing Plutocrats can do it.