Gingrich would give the top 1 percent a $430,000 tax break
By Suzy Khimm,
The Tax Policy Center has run the numbers on Newt Gingrich’s tax plan. The verdict? Gingrich’s plan does more for wealthy American households than any plan released by the other 2012 candidates — and increases the deficit by trillions.
GETTY IMAGESGingrich would give the top 1 percent of U.S. households an average $430,000 tax cut, with their tax rate dropping 22 percentage points under the assumption that the Bush tax cuts expire in 2012. Households with an income of more than $1,000,000 would get a whopping $760,000 tax break on average, heavily weighted by the top 0.1 percent, who’d get a $2.3 million tax reduction. By contrast, the bottom 20 percent would save only an average of $649 under the Gingrich plan — with their tax rate dropping just 1.5 percentage points — and more than half of that group wouldn’t see any benefit at all. And those earning $40,000 to $50,000 would get a tax cut of about $1,900 on average.
Gingrich’s plan allows taxpayers to either keep their current tax rate or transition into a “flat tax” system with a rate of 15 percent. So while not everyone would benefit, no one’s taxes would go up. The proposal also preserves most of the current deductions and loopholes, which is partly why some poorer- and middle-class Americans would be slightly better off under the plan. And while Gingrich’s tax plan closely resembles Rick Perry’s, it’s also more heavily weighted to helping the rich: Under Perry’s plan, the top 1 percent would have to pay nearly $60,000 more in taxes than under Gingrich’s, for instance. (Gingrich also vows to lower corporate tax rates further than any other 2012 candidate, bringing the rate down to just 12.5 percent, compared to the current 35 percent.)
That said, by lowering tax rates so dramatically while preserving most of the tax deductions and exclusions, Gingrich’s plan would also significantly increase the deficit. The Tax Policy Center estimates that it “would add about $1 trillion to the federal deficit in a single year,” says resident fellow Howard Gleckman. He adds, “While most of the nation’s lowest-income families would get no benefit from these tax cuts, the top 0.1 percent (who make an average of more than $8 million) would get about a quarter of the windfall.”