The central theme to Mitt Romney’s economic plan is to cut the size, and scope of the Federal Government in an effort to spur the economy. His fiscal, deregulation, trade and tax polices are aimed to cut red tape and increase competitive advantages to large corporations and high net worth individuals. President Barack Obama’s economic plan is classic Robin Hood thinking. His tax policies look to lower taxes for the middle and lower brackets. It gives small business (with sales under $5 million a year), lots of incentives to hire new employees and expand. The plan would likely increase the net corporate tax rate, because it wants to close many loopholes the S&P 500 takes advantage of. This tax policy would lead to the top 2 percent paying higher taxes. The tax policy would implement the “Buffet Rule,” increasing taxes for individuals making more than a million dollars annually. Here is an analysis of Romney vs. Obama tax policy.
Romney will maintain and extend the Bush tax cuts. For individuals with an adjusted gross income of $200,000, Romney would eliminate the taxation on capital gains, dividends and interests. Romney’s tax policy will also eliminate the “death tax” also called the estate tax, which means heirs don’t have to pay taxes on any amount they inherit. Currently, there is a $5 million estate tax-free exemption for individuals and $10 million exemption for married couples. There is a 35 percent estate tax on amounts greater than that.
Romney’s tax policy suggests maintaining marginal rates as they currently are. The tax policy section states Romney would “pursue a conserative overhaul of the tax system that includes lower and flatter rates on a broader tax base.”
The former Massachusetts governor also wants to lower corporate income tax rates to 25 percent from its current 39 percent, which is the Organization for Economic Co-operation and Development’s (OECD) average. The OECD is comprised of 34 countries including the United States, Australia, Canada, France, Germany, Israel, Japan, Mexico, England and Spain.
Romney’s tax policy outlines that he would change the “worldwide tax system” to a territorial tax system.” Currently the “worldwide tax system” taxes business income at the U.S. rate of 35 percent regardless of whether the income is earned in the U.S. or in other countries. If a business makes money in one country and that country’s tax rate is lower than the U.S. rate, when the money is repatriated back to the U.S. dollar, the difference between that country’s tax rate and the U.S. tax rate is paid to the IRS. According to Romney’s tax policy, the “territorial tax system” would allow for income to be taxed at the rate of the country in which it is earned, which would help our economy.
Romney’s idea to eliminate on capital gain, dividends and interests for those making under $200,000 is interesting. This would encourage families making under $200,000 a year to really save for their future. Typically the people making under $200,000 or less don’t save enough for their future. Romney’s tax policy to lower taxes and broaden the base to the lower and middle sounds like a tax increase for the lower brackets. Furthermore, Romney does not make any clear statements about closing loopholes for big corporations.
When it comes to the territorial tax system, Romeny’s tax policy gives companies more incentive to bring their profits back to the U.S. because they are not double taxed like they are with the worldwide tax system currently in place. While cutting taxes to the OECD average sounds good, many large companies, when paying their taxes after exploiting loopholes and deductions, typically pay less than the OECD average already. In that case it would only benefit them more and hurt the middle class. It sure looks like his tax policy would lower the rate on corporate taxes, but shows no granular ideas on loopholes to close, like the President’s tax policy mentions often and is specific which loopholes would be closed.
Watch video of Obama on Romney’s tax policy
Obama’s plan for tax reform centers on the idea of lowering tax rates for individuals and corporations and have fewer brackets. Obama’s tax policy includes the implementation of the Buffet rule in which no household making over $1 million a year will pay a smaller share than the middle income tax brackets. Obama’s tax policy would allow for the expiration of tax cuts for singles making over $200,000 and married couples making over $250,000. Obama’s tax policy also includes cutting loopholes and unfair deductions in an attempt to make the system less complex. However, the plan is littered with lots of little taxes passed on to businesses and looks complicated.
A lot of Obama’s tax policy is what he promised in his 2008 campaign. He did try to get some of these initiatives moving but Congress blocked him on every front. He was forced to extend the Bush tax cuts against his own campaign promise. Where Obama’s tax policy greatly differs from Romney’s tax policy, is he believes in broad tax cuts for the middle class rather than big tax cuts for companies and people in the highest tax bracket will be more effective in creating jobs in the United States.
Obama plans to cut the deficit by $1.2 trillion over the next decade through tax reform, most of which will come from large corporations and the highest tax brackets. He clearly wants to raise the revenues the IRS is collecting, but only from what he would deem the “elite.” Obama’s tax policies are complex and loaded with special taxes to large energy companies and the S&P 500 in general. There are loads of little programs and incentive for smaller and medium sized company’s to expand. This tax policy would complicate an already way too hard to understand tax code.
Watch video of Romney speaking on lowering taxes