Candidates' budget plans offer one of the sharpest contrasts

  • Updated: September 15, 2012 - 7:26 PM

Mitt Romney's budget plan would raise income taxes for many families making $100,000 to $200,000, analyses by leading GOP economists cited by the Romney campaign show.

The analyses concluded that the plan could work as Romney has said, but that doing so would require eliminating all deductions and credits for households with income of more than $100,000. That would include wiping out such popular tax provisions as the deductions for mortgage income, charitable contributions and state and local taxes.

The Obama plan

Taxes provide one of the sharpest contrasts between the candidates. Obama has made raising taxes on the wealthiest Americans a centerpiece of his campaign. He says that requiring the wealthy to pay "their fair share" is key to making sure the government can meet the country's needs for improved education, upgraded roads and bridges, new industries and other steps to produce future jobs.

He would allow the Bush-era tax cuts for incomes over $250,000 to expire as scheduled on Jan 1. The tax cuts for those making less would remain in place. Under his plan, the top 1 percent of taxpayers would see an average tax increase of about $70,000, said estimates by the Tax Policy Center, a Washington think tank cited by both parties.

The Romney plan

Romney's tax plan is more complex. He has proposed several measures to reduce taxes, saying that further cuts are necessary to spur growth. His plan includes cutting current income tax rates by one-fifth, eliminating the alternative minimum tax, ending estate taxes and wiping out taxes on dividends and interest for individuals with income below $100,000 and couples who make less than $200,000.

Those tax cuts would total $200 billion to $220 billion a year. To keep the deficit from soaring, Romney has pledged to make the plan "revenue neutral." That means that for every dollar the plan would reduce federal revenue, he would raise a dollar somewhere else -- base broadening in jargon. He has declined to name any of the sources he would tap for new revenue. Voters should trust that he could achieve his goal without raising middle-class taxes because "five different economic studies, including one at Harvard and Princeton" support his case, he said.

The Harvard study was by Martin Feldstein, former head of the Council of Economic Advisors under President Ronald Reagan. He said that "it is feasible to combine tax cuts and base broadening as Gov. Romney suggests without raising the budget deficit or imposing any middle-class tax increase."

Households earning more than $100,000 "are not the 'middle class,'" he wrote in the expanded version, noting that incomes over $100,000 put a family into the upper fifth of U.S. incomes. For those taxpayers, making the plan work would require eliminating all deductions and credits, he found.

Romney, who has defined middle income as "$200,000 to $250,000 and less," said Feldstein's study "doesn't necessarily show the same growth that we're anticipating."

The Princeton study, by economist Harvey Rosen, estimated that new economic growth spurred by the tax cuts could generate $25 billion to $60 billion of tax revenue, although the estimates include a lot of uncertainty. Even with the added growth, Romney's plan would require eliminating many deductions for households with income over $100,000, Rosen's study concluded.

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