Republican Presidential candidate Mitt Romney has released an updated set of proposals for cutting taxes.
The former Massachusetts governor expanded Wednesday on the plans he originally released last September after some critics found them to be too vague (see Romney Proposes Tax Reform Plan and Romney Vague on Tax Plan). He proposed making a permanent-across-the-board 20 percent cut in the marginal individual income tax rates, with a new top rate of 28 percent.
“By lowering those marginal rates, we help businesses that pay at the individual tax rate to have more money so they can hire more people and pay higher wages,” said Romney. “Do you know how many people in America work in companies that are taxed at the individual rate, not at the corporate rate? About 55 percent of American workers work in those kind of businesses. So we want those businesses to grow and thrive and be successful. President Obama’s plan is to raise taxes on those enterprises. My plan is to lower it by 20 percent and put more people back to work.”
Romney said he would maintain the current 15 percent rate on income from qualified dividends and capital gains, but cut taxes further on lower- and middle-income Americans by ensuring that families with an annual income below $200,000 would pay no taxes on income from capital gains, interest and qualified dividends. Romney also wants to eliminate the estate tax and repeal the alternative minimum tax.
An analysis of Romney’s original plans last month by the Tax Policy Center concluded that they could potentially cut taxes for millions of households, but would provide most of the benefits for those with the highest incomes, while potentially increasing taxes by more than 60 percent for those making less than $20,000 a year. However, that was assuming that Romney would not extend the more generous expanded versions of the Child Tax Credit and the Earned Income Tax Credit that were passed in 2009, and that the American Opportunity Tax Credit for tuition would expire. The newly unveiled proposal does not clarify his plans for those tax breaks.
Romney also said he wants to make the U.S. corporate tax system more globally competitive by cutting the top rate to 25 percent from a high of 35 percent. The Obama administration proposed Wednesday to cut it to 28 percent as part of a broad set of business tax reforms (see Obama Proposes Business Tax Reforms). Like the Obama administration, Romney wants to make the Research and Experimentation Tax Credit permanent.
However, unlike the Obama administration, Romney favors switching to a territorial tax system in which multinational corporations would only be taxed on the profits they earn in the U.S. The Obama proposals, in contrast, would impose an immediate minimum tax on foreign income deferred in low-tax jurisdictions, with a foreign tax credit allowed for income taxes on that income paid to the host country. Romney’s plan would repeal the alternative minimum tax on corporate income.
Romney has faced controversy over his own taxes. He initially refused to release his own tax returns and last month under increasing pressure agreed to release his 2010 tax returns and an estimated 2011 return (see Former IRS Commissioner Gives Blessing to Mitt Romney's Taxes). The returns revealed that Romney was paying an effective tax rate of only 13.9 percent in 2010 and 15.4 percent in 2010 on mostly investment income.
On Thursday, Bloomberg.com published an investigation of Romney's tenure on the board of directors of Marriott International, during which time the hotel chain repeatedly clashed wih the IRS over complex tax avoidance measures, including the use of a so-called Son of BOSS tax shelter while Romney was the head of the audit committee in 1994.