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Americas individual tax code applies relatively high marginal
tax rates on a narrow tax base. Those high ratesdiscourage work and
entrepreneurship, as well as savings and investment. With 54
percent of private sectorworkers employed outside of corporations,
individual rates also define the incentives for job-creating
businesses.Lower marginal tax rates secure for all Americans the
economic gains from tax reform.
Make Permanent, Across-The-Board 20 Percent Cut In Marginal
Rates . This bold stroke reduces the taxon the next dollar of
income earned for all taxpayers. The new top rate of 28 percent
returns to the top ratesigned by President Reagan in 1986.
o
Pro-Growth. These tax cuts relative to President Obamas proposal
to raise the tax rates on themost successful business owners will
increase wages in non-corporate businesses by 6 percent,increase
investment by 10 percent, and increase business receipts by 16
percent. (Robert Carroll et al.,Income Taxes and Entrepreneurs Use
of Labor, Journal Of Labor Economics , 4/2000; Robert Carroll et
al., Entrepreneurs,Income Taxes, and Investment, in Does Atlas
Shrug? The Economic Consequences Of Taxing The Rich , 2002;
RobertCarroll et al., Personal Income Taxes and the Growth of Small
Firms , Tax Policy And The Economy , 2001)
o Fiscally Responsible. Government cannot continue to increase
irresponsibly the size of annualdeficits. Stronger economic growth
and reductions in spending will help to ensure that these tax
cutsdo not expand deficits. In addition, higher-income Americans in
particular will see limits placed ondeductions, exemptions, and
credits that are currently available. The result will be a
pro-growth taxcode that still raises the necessary revenue, retains
the existing progressivity, and ensures thatmiddle-income Americans
see real tax relief.
o Environment For Job Creation. President Obama has presided
over endless debates abouttemporary tax provisions that have
consumed Washington and left businesses and workers uncertainof
what they will owe the government. The tax system must not only be
flatter, fairer, and simpler, butalso stable. Returning policy
certainty to pre-Obama levels could create 2.5 million additional
jobs inless than two years. (Scott R. Baker et al., Policy
Uncertainty Is Choking Recovery, Bloomberg News , 10/5/11)
Promote Savings And Investment For The American People. Mitt
Romney will maintain the current 15percent rate on income from
qualified dividends and capital gains. He will cut taxes further on
lower- andmiddle-income Americans by ensuring that families with an
annual income below $200,000 will pay no taxeson income from
capital gains, interest, and qualified dividends. These low tax
rates will create powerfulincentives for Americans to save and
invest, while spurring business investment and economic growth.
o Compare President Obama. The Presidents proposal raise s
dividend tax rates from 15 percent tomore than 43 percent and
capital gains tax rates from 15 percent to almost 24 percent with
adverseeffects on Americans equity investments and on business
investment.
Abolish The Death Tax. Eliminating the death tax will allow
families to pass assets between generationswithout complicated tax
avoidance schemes and without breaking up family businesses.
o Compare President Obama. Under Obama, the death tax is slated
to rise from 35 percent to 55percent in 2013.
Repeal The Alternative Minimum Tax (AMT). The AMT was originally
implemented in the 1970s with the
purpose of ensuring that the wealthiest of Americans could not
artificially reduce their tax burden. But ifCongress fails to pass
the annual AMT patch, many middle-income Americans will become
ensnared in theAMT trap. It should be repealed immediately to
eliminate harmful distortions in the tax code, and replaced witha
simpler tax system that reduces tax avoidance schemes.
Part Two: Make The Corporate Tax System Globally Competitive
The U.S. economys 35 percent corporate tax rate is among the
highest in the industrial world, reducing the abilityof our nations
businesses to compete in the global economy and to invest and
create jobs at home. By limiting investment and growth, the high
rate of corporate tax also hurts U.S. wages.
http://www.nber.org/papers/w6578http://www.nber.org/papers/w6578http://www.nber.org/papers/w6578http://www.nber.org/papers/w7980http://www.nber.org/papers/w7980http://www.nber.org/papers/w7980http://www.bloomberg.com/news/2011-10-06/policy-uncertainty-is-choking-recovery-baker-bloom-and-davis.htmlhttp://www.bloomberg.com/news/2011-10-06/policy-uncertainty-is-choking-recovery-baker-bloom-and-davis.htmlhttp://www.bloomberg.com/news/2011-10-06/policy-uncertainty-is-choking-recovery-baker-bloom-and-davis.htmlhttp://www.bloomberg.com/news/2011-10-06/policy-uncertainty-is-choking-recovery-baker-bloom-and-davis.htmlhttp://www.nber.org/papers/w7980http://www.nber.org/papers/w6578
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Cut The Corporate Rate To 25 Percent . It is vital that the U.S.
move to quickly reduce the corporate tax rateand put American
companies on a level playing field. The high U.S. corporate tax
rate handicaps the nationsoverall economy in competition with the
rest of the world.
o Pro-Growth. High corporate income taxes have been shown to
have a particularly high negative effecton GDP and economic growth
rates. Reducing the corporate tax rate will not only create jobs,
but alsoboost wages. A 10 percent rate cut raises wages by an
estimated 9 percent. (Scott A. Hodge, Ten Benefits ofCutting the
Corporate Tax Rate , Tax Foundation , 5/2011)
o Fiscally Responsible. Broadening the corporate tax base,
accompanied by greater revenue fromincreased economic activity and
greater corporate investment in the U.S., will cover the cost of
thereduction in the corporate tax rate.
Strengthen And Make Permanent The R&D Tax Credit. This
credit promotes innovation in bothmanufacturing and
non-manufacturing industries, and helps businesses plan their
innovation spending. Witha strong, permanent credit, companies will
now be able to invest for the future with confidence.
Switch To A Territorial Tax System. The United States taxes
income on a worldwide basis, regardless ofwhere it is earned. This
worldwide system of taxation sets the U.S. apart from most other
OECD countries,which have converted to territorial systems of
taxation. Japan and the United Kingdom are two countries
thatrecently traded their worldwide tax systems for territorial
systems. This switch will promote U.S. interests in
two key ways:o Encourages Domestic Investment Of Foreign
Profits. The U.S. system of worldwide taxation
(particularly when coupled with the U.S.'s high corporate rate)
has the perverse effect of makingreinvestments of foreign profits
in the U.S. more costly than reinvestments made abroad. A
territorialsystem will avoid the threat of further taxation from
precluding a decision to reinvest profits at home.
o Makes U.S. Companies More Competitive In The World Market. The
worldwide system burdens theforeign operations of U.S. companies
with an added layer of tax not borne by their foreign
competitorsthat are headquartered in the local markets or in other
countries with territorial tax systems. Thissecond layer of tax
makes U.S. companies less competitive in foreign markets. A
territorial system thathelps U.S. companies compete in foreign
markets will create jobs in the U.S. as well.
Repeal The Corporate Alternative Minimum Tax (AMT). One major
drawback of the Corporate AMT is itseffect of penalizing companies
that invest in capital equipment. A growing economy depends on
robust capitalinvestment. Unfortunately, corporations that are
subject to the Corporate AMT are unfairly hit by strictdepreciation
rules. Due to this chilling effect on capital investment, the
corporate AMT must be fully repealed.Investment will no longer be
penalized, spurring labor productivity, an increase in American
incomes, andgreater economic prosperity.
Mitt Romneys Fiscal Policy Proposals
As he announced in his fiscal plan last November, Romney is
committed to reducing federal spending to 20percent of GDP by 2016
while reversing President Obamas dangerous cuts to n ational
defense. Achieving thisgoal will require spending cuts of
approximately $500 billion. The result will be to return
governments share of what this nation produces to the level
pre-dating the financial crisis and the rapid escalation of
spending underPresident Obama. Specifically, the plan:
Cuts Programs That America Cannot Afford. The first step in this
direction is to repeal Obamacare.
Sends To The States Programs That They Can Implement Better. For
instance, block-grant Medicaid.
Improves Efficiency And Effectiveness. What the government needs
to do, it should do more effectively.
Looking ahead to yawning future deficits from the unfunded
promises of Social Security and Medicare thatthreaten the nations
solvency and foreshadow growth-destroying tax hikes, Romney
proposes to shore up theseimportant programs without impacting
seniors who are at or near retirement, and without tax hikes.
http://taxfoundation.org/files/sr192.pdfhttp://taxfoundation.org/files/sr192.pdfhttp://taxfoundation.org/files/sr192.pdfhttp://taxfoundation.org/files/sr192.pdf
