Wall Street Journal: Romney’s Tax Plan Hits Middle Class

Study: Romney’s Tax Plan Hits Middle Class

By John D. McKinnon

A new study released Wednesday suggests that Mitt Romney‘s tax plan would benefit the rich and hurt the poor and middle class, no matter how current blanks in the plan are filled in.
Mr. Romney’s ambitious plan would extend current Bush-era tax rates, plus cut rates another 20 percent, eliminate investment taxes altogether for households making under $200,000, and abolish the dreaded alternative minimum tax. But it provides few details about what tax breaks would be pared to offset the budget hit.
The study basically concludes that eliminating tax breaks to offset the impact of Mr. Romney’s rate cuts would inevitably hurt the middle class. It was done by scholars working with the nonpartisan Tax Policy Center, including a former Obama administration economist.

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Even assuming that tax breaks such as the charitable and mortgage interest deductions are eliminated for the wealthy first, and only then reduced as needed for other income groups, “the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households,” the study concludes.
The study makes an assumption that might or might not prove out when the legislation gets written – notably, that capital gains and dividend rates aren’t changed from the current 15% top rate for high earners. Holding the line on current investment tax rates is GOP orthodoxy right now. But when deal-making time arrives, it’s possible that GOP opposition will soften, if it’s necessary to get a broader deal with Democrats on lower rates.
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