Republican Presidential candidate Rick Santorum’s tax plan would reduce federal tax revenues substantially, according to a preliminary analysis by the Tax Policy Center.

TPC, a think tank that operates under the auspices of the Urban Institute and the Brookings Institution,

has estimated that on a static basis, the plan by the former U.S. Senator from Pennsylvania would lower federal tax liability by about $1.3 trillion in calendar year 2015 compared with current law, roughly a 40 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be about $900 billion in calendar year 2015.

During his campaign, Santorum has proposed permanently extending the 2001-10 Bush tax cuts, which are currently scheduled to expire in 2013, and further reducing individual income taxes. Santorum wants to collapse the current six tax brackets into just two brackets with rates of 10 and 28 percent. He has also proposed tripling the exemption for dependent children, cutting the top tax rate on long-term capital gains and qualified dividends to 12 percent, and repealing the alternative minimum tax.

Santorum has also proposed cutting the corporate income tax rate in half; eliminating the estate tax; and repealing the taxes enacted in the health care reform law.

Santorum’s plan would cut the corporate income tax rate from 35 to 17.5 percent—and to zero for manufacturers. He would also boost the research and development tax credit from 14 to 20 percent and make it permanent, while allowing full expensing of equipment. The plan would permit multinational companies to repatriate their foreign profits held overseas without any tax if the funds are invested in plant and equipment, or otherwise at a 5.25 percent tax rate.

Santorum has said he would also permanently repeal the 0.9 percent tax on wages and the 3.8 percent tax on investment income of high-income individual taxpayers that were imposed by the 2010 health reform legislation and are scheduled to take effect in 2013.

The Tax Policy Center’s preliminary analysis of the Santorum plan is based on information posted on his campaign Web site. The analysis measures the change in tax liabilities against two alternative baselines: current law, which assumes that the 2001-10 tax cuts all expire in 2013 as scheduled, and current policy, which assumes that the 2011 law is permanent, except for the one-year payroll tax cut and temporary investment incentives.

Compared with the current law baseline, Santorum’s plan would cut taxes for about 81 percent of taxpayers by an average of more than $9,700, while less than one-half percent would face tax increases averaging about $175, according to TPC. "In contrast, compared with current policy, about 1 percent of tax units would see their 2015 taxes go up an average of more than $200 while 69 percent would get tax cuts averaging nearly $7,800," aid the report. "Some people filing as head of household would experience tax increases because of the elimination of that filing status."

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