Way back in March, the nonpartisan Tax Policy Center published a fairly detailed analysis of Mitt Romney’s new tax plan and there were three main takeaways: the policy would disproportionately benefit the very wealthy; it would make the deficit worse; and it would actually increase taxes on those towards the bottom.
It’s that third point that tends to be the most controversial. How can Romney cut taxes across the board while simultaneously increasing the burden for some? The answer is, by eliminating specific breaks that benefit working families, millions of Americans will end up paying more, even after an across-the-board cut.
A new analysis shows that the House Republican tax plan suffers from an identical flaw.
The report, prepared by Senate Democrats and reviewed by nonpartisan tax experts, marks the first attempt to quantify the trade-offs inherent in the GOP tax package, which would replace the current tax structure with two brackets – 25 percent and 10 percent – and cut the top rate from 35 percent.
Those changes would benefit virtually every taxpayer, but they also would reduce federal tax collections by about $4.5 trillion over the next decade, according to the nonpartisan Tax Policy Center. To avoid increasing the national debt by that amount, GOP leaders such as House Budget Committee Chairman Paul Ryan (Wis.) have pledged to get rid of all the special-interest loopholes and tax shelters that litter the code.
Republicans have declined to identify their targets. However, some of the biggest “loopholes” on the books are popular tax breaks for employer-provided health insurance, mortgage interest, state and local taxes, and retirement savings, which disproportionately benefit the upper middle class.
As a consequence, millionaires would get a tax cut of about $300,000 annually, while a married couple earning $100,000 would see their net tax burden increase by about $2,700 a year.
Don’t be too surprised if we see campaign ads this fall about the “Republican plan to raise middle-class taxes.”