Friday, July 20, 2018

Garbage: Romney's Tax Plan

Credit: Romney Campaign Website
Romney's Unfortunate Tax Plans

The Tax Policy Center recently concluded that Romney's tax plan do not add up.

The Tax Policy Center, non-partisan group which analyzes tax plans and issues, recently concluded that Romney could not keep all of the promises he had made on individual tax reform: including cutting marginal tax rates by 20 percent, keeping protections for investment income, not widening the deficit and not increasing the tax burden on the poor or middle class. Romney’s plan, as it stands, would cut taxes for rich families and raise them for everyone else.

Over the course of the campaign Romney has stated that 47% of this country does not matter and Obama recently attacked Romney in the second debate of supporting the nation's 1% at the expense of everyone else. Taking these statements at face value you might dismiss them based on partisanship interests and unfortunate propaganda-like mudslinging. However, a closer look at the details and math of Romney's own proposals regarding his tax plans reveals that both Romney and Obama were correct in their statements: Romney doesn't care about the financial health of most Americans and is looking to preserve the outrageous profits and unwieldy greed of a small percentage of this country's population.

The Tax Policy Center has stood by its assessment of Romney's tax plan despite the fact that Romney called the findings "garbage" and the Romney campaign has been haranguing the Center over a non-existent "White House visitor log". Let's make something clear, The Tax Policy Center is independent and gets no political funding. Moreover, the Center was founded by tax experts who served under Reagan, Bush and Clinton with most coming from Republican Administrations. The Center most likely has a healthy dose of Republican voting tax geeks. Lastly, the Center based its assessment of the Romney tax plan on the Romney campaign's own numbers and information provided to the Center since 2008.

The Tax Policy Center's study is actually refreshing if only because it provides an in depth, mathematical analysis of a segment of Romney's presidential plans that has been sorely lacking since he began campaigning. Recently, Biden had pushed Ryan for details of Romney's economic plan, of which Ryan was unable to provide even after he had declared himself a "numbers man" several times since being selected as Romney's running mate. Also, Paul Ryan, during an interview on Fox News (otherwise known as 'Romney Campaign Headquarters') with Chris Wallace, was asked to prove how Romney's plan was mathematically possible after he stated it was "revenue neutral". Ryan stated it was "complex" and that it would "take him too long to go over the math" as if he was being asked to delve into the accuracy and feasibility of string theory. Ryan later stated that he didn't want to delve into the intricacies of the tax code because he didn't want to "bore people or get them to change the channel". I am sure most Americans do like glossy sound bites but to refuse to divulge a single detail of a tax plan that could have a dramatic and tumultuous effect on our country's and citizens financial health doesn't just seem lazy and sloppy but childish and irresponsible.

On Romney's campaign website he proposes to do the following regarding tax policy: reduce federal corporate taxes to 25% and eliminate the AMT or Alternative Minimum Tax. By reducing the corporate tax rate Romney figures that this will energize the economy and create jobs by attracting more foreign businesses and keeping US businesses from establishes factories and offices in other countries. Romney also figures that by eliminating the AMT more wealth will trickle down to the masses.

Lowering corporate tax sounds wonderful and marvelously intuitive but it would not accomplish what Romney hopes. Additionally, by eliminating the AMT it will insure that the uber-wealthy, with their armies of tax consultants and lawyers, can actually manage to not pay income tax.

Romney declares that the United States has one of the highest corporate tax rates in the world. This is actually true. The US corporate tax rate is 35%. The only country higher is Japan, which has a 40.69% tax rate. The United Kingdom has a 20-24% corporate tax rate, Sweden has 26.3%, Denmark has 25%, and India has 10%. China has a 25% corporate tax rate and Romney, who loves Chinese business as evidenced by his Bain Capital investments, was no doubt influenced by this rate in proposing lowering the US rate.

But the Romney team has been most impressed with Canada, which currently has a 15% corporate tax rate. Canada has cut taxes 30% in the past six years. However, if we look at the numbers, something which Ryan claims he loves to do, we find that the Canadian economy only grew 1.8% in the first two quarters of 2012. The United States, on the other hand, grew 1.7% in the same quarters. Moreover, unemployment has only dropped 1% in Canada since 2011 as opposed to 2% in the United States during the same time period.

Canada's economy has not busted out of its rut despite significantly lowering the corporate tax rate. Of course, to be balanced in this analysis it should be stated that the Canadian economy did not fall into the same deep pit as the United States, which was almost entirely due to strong banking and mortgage regulations. Let's remind ourselves, that the economy tanked many, many months before Obama took office and that the nosedive of our economy was caused by lax banking and mortgage policies that were given the seal of approval by the Republican party and the Bush Administration.

Attracting businesses to a country is not only about low corporate taxes. It is also about wages and skilled workers. A country with a comparable corporate tax rate or higher could still be very attractive to companies if the average wage was low and the workers were skilled. India's corporate tax rate is 10% and I would wager they could probably raise it to 40% and still attract economic investment because the average wages are very low compared to Western and modern, industrialized nations and the skills of their workers are very high.

Under this analysis, what could invigorate the economy is increasing the skills of our workers by improving education, providing affordable education, funding job certifications and providing tax incentives to companies that establish apprenticeship and learning programs.

The corporate tax rate in Denmark might be lower than the United States but their wages are very high compared to us. The attraction of doing business in Denmark is accessing their exceptionally skilled workers. If the US could improve its pool of skilled workers, international businesses would be drawn to us, despite a 35% corporate tax rate, because our wages are lower than most modern, industrialized nations. Once again, our downfall is education and not taxation.

Lowering corporate tax is not going to solve our economic problems or re-invigorate our economy though it will probably make established, wealthy companies very happy and it might also ease the burden on smaller and medium sized businesses. But who's to say that CEOs and corporate board members are going to share any of their tax savings with their employees by raising wages and improving benefits or by funneling it into the economy by buying and spending on goods and services. If there is one thing that wealthy people and corporations do well and consistently is to save money and hide it in tax shelters that are immune to the reach of the IRS.

AMT or Alternative Minimum Tax is another aspect of our tax code that Romney wants to change. AMT was passed in 1969 after Treasury Secretary Joseph Barr noted that 155 high-income households had not paid a dime of income tax. AMT essentially prevents people and corporations from taking advantage of so many tax benefits and deductions that their tax liability goes to zero. AMT was modified by Reagan who established several exemptions and tiers. But AMT still holds that there is a minimum amount of tax an individual or corporation must pay regardless of benefits and reductions.

With an eliminated AMT, a corporation, which has already had their corporate tax rate lowered to 25% under Romney's plan, could file their returns and pay nothing to the federal government. After all, with so many benefits and deductions corporations can currently claim, it entirely feasible that with the help of tax advisers many corporations can find a way to dwindle the 25% tax rate to 0%. With savvy and successful corporations paying nothing to the US government, who will pay for Romney's increase in military spending (the only proposal he was been consistent on since he started campaigning)? Or his reduction in the deficit? The only people who won't benefit from a decreased corporate tax rate or the elimination of AMT are the 47% Romney dismissed as unworthy of attention and a sizable segment of the middle class who don't fall into the 47% or the illustrious top tier of the very wealthy.

As usual, citizens with the least amount of money or expendable income will be shouldered with the burden of funding our government and, by logical conclusion, the whirlwind travels, Ivy League educations, trust funds and off-shore accounts of the greedy and supremely wealthy.

About the Writer

Risa Peris is a writer for BrooWaha. For more information, visit the writer's website.
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