Trillions in tax cuts
By Editorial Board,
THE REPUBLICAN presidential candidates claim to abhor debt, yet propose tax cuts that would add trillions more.
The case for continuing the George W. Bush tax cuts, at a cost of $3.7 trillion over 10 years (including interest), is shaky enough. The cuts for the wealthy alone, which President Obama would end, would cost with interest about $1 trillion over the next decade. But the GOP candidates want to continue all those cuts — and add many more, the vast bulk of which would again go to the wealthiest taxpayers.
Former Massachusetts governor Mitt Romney proposes additional cuts that would drain $180 billion from the treasury in 2015 alone, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. The nonpartisan center has not calculated the 10-year cost of the plan. But merely multiplying by 10 illustrates that Romney is talking trillions.
And Mr. Romney’s is the most modest of the GOP proposals. Former House speaker Newt Gingrich’s plan would cost an astonishing $850 billion in 2015 on top of the Bush tax cuts. Former Pennsylvania senator Rick Santorum’s would cost $900 billion in 2015 alone.
The centerpiece of the Romney plan is eliminating all taxes on investment income for taxpayers earning less than $200,000 per couple. Wealthier taxpayers would keep the 15 percent capital gains rate that allowed Mr. Romney and his wife to pay such a low share of their income in taxes. The corporate tax would be reduced from 35 percent to 25 percent. Like Mr. Santorum and Mr. Gingrich, Mr. Romney would eliminate the estate tax and the alternative minimum tax and would repeal new taxes on the wealthy contained in the health-care law and set to take effect in 2013. The benefits of his plan would be heavily skewed toward the wealthy. Millionaires would see an average tax cut of $146,000. Meanwhile, because Mr. Romney would let some lower-income Obama tax breaks lapse, taxes could actually increase on a significant share (between 16 and 20 percent) of taxpayers earning less than $50,000.
The Gingrich plan is even more reckless. He would let taxpayers choose between the existing code, with the Bush tax cuts extended, or a 15 percent flat tax but one that maintains deductions for mortgage interest, charitable contributions and the child and earned-income tax credits. Mr. Gingrich’s flat tax would be on wage income alone; investment income, such as capital gains, dividends and interest, would not be taxed at all. The corporate tax rate would drop to 12.5 percent — unfortunately, without broadening the base by eliminating existing breaks.
These tax cutters gone wild will note, correctly, that the Tax Policy Center estimates are static: They do not take into account potential growth spurred by lowering taxes. But there is no rational economic scenario under which these tax cuts would pay for themselves through the magic of economic growth.
It makes no sense to further benefit the wealthiest taxpayers at a time when spending programs for the most vulnerable would be on the chopping block — of necessity, given the candidates’ pledges to cap spending. In their fiscal consequences these cuts would be disastrous; as a matter of fairness, even more so.