Back to previous page

Why 2012 is about tax cuts for the wealthy

By ,

Now that we’ve heard from the number-crunchers on Rick Perry’s tax plan, how does it stack up against Herman Cain’s? As expected, Perry’s plan leaves the poor and middle-class with more after-tax income, while Cain’s plan is significantly more regressive—it leaves everyone earning under $100,000 with less after-tax income, according to the Tax Policy Center. But both plans would leave wealthy Americans—particularly those earning $500,000 or more—with a lot more after-tax income income, with rich Americans benefiting slightly more under Perry than Cain.

Here’s a chart showing how much income Americans in different economic classes  would have after taxes, if the Perry and Cain plans were enacted:


The graph above also includes Tax Policy Center’s analysis of how President Obama’s American Jobs Act would impact U.S. households, which incorporates both the sweeping payroll tax cuts and the tax increases on the wealthy that are used to pay for them. It’s not Obama’s full tax reform plan, so it’s not meant to be an apples-to-apples comparison. But it’s one indication of the stark differences between Republicans and Democrats in terms of tax policy.

Under Obama’s jobs act, lower- and middle-income households across the board would boost their after-tax income: for Americans with incomes of $50,000 or less, it would be a bigger boost than under Perry or Cain’s plan. Even the wealthiest households who would experience some tax increases under Obama’s plan would still see their overall cash income go up slightly. But it’s a stark drop-off from the Cain and Perry alternatives, which benefit the wealthy many times over.


Whether the Republicans will continue to push for such major changes after the GOP primary is unclear. But Perry and Cain’s plans—and the bigger debate about taxes and income inequality—help set the stage for the looming debate over whether the Bush tax cuts should be extended after they expire at the end of 2012. For all the differences between the GOP candidates on taxes, one thing seems to remain the same, argues Jared Bernstein, former economic policy adviser to Vice-President Biden. Though Romney hasn’t released a detailed tax plan, he is pushing for corporate tax cuts, the Bush tax cuts, and other big changes that directly benefit the wealthiest Americans. “There’s a continued allegiance to supply-side, trickle-down economics—the belief that you cut taxes, and not just a little, for those at the top scale, and they’ll generate economic activity and lift up everybody else,” Bernstein says.

On the other side of the spectrum, some economists believe the emergence of Cain and Perry’s tax plans signal a growing desire among Republicans to embrace sweeping tax proposals that go well beyond the bipartisan “comprehensive” reform that legislators have floated in the recent past. “Because the economy has continued to be weak, and Obama’s policy hasn’t delivered enough, the politicians are judging that voters are hungry for more radical changes than they perhaps they would be,” says Kevin Hassett of the American Enterprise Institute, an adviser to John McCain’s 2000 campaign who says he supports Cain’s plan over Perry’s. Hassett believes that the GOP primary has already shown that Republicans are, in fact, interested in moving beyond thinking that guided the Bush tax cuts, as evidenced by Cain’s plan. “It’s a change that Republicans—at least some of them—are focusing more on the consumption tax,” he says.

To be sure, neither Cain nor Perry may survive the 2012 primary, and their big tax reform ideas may well go down with them. Cain, in fact, already tried to tweak his 9-9-9 plan to try to address the criticisms about its impact on the poor, and it’s uncertain how much his surge in the polls reflects the popularity of his tax plan. But their proposals have already helped shape the debate within GOP about taxes, income, and the economy—a debate that Obama has already made the centerpiece of his own 2012 campaign.

© The Washington Post Company