Politicians and policy makers always seem to be talking about “broadening the tax base” and “eliminating tax loopholes,” but rarely do we hear specifics.
The problem is that somebody always depends on those so-called “loopholes,” whether it’s a large corporation or a small business, a millionaire or somebody living paycheck to paycheck. In recent months, the debate over Republican presidential candidate Mitt Romney’s tax proposals has led to rampant speculation over who would be helped and harmed by his tax policies should he win claim to the Oval Office in November.
Romney has been about as forthcoming with the details of his tax policies as he has been with his tax returns. The basic message seems to be that he will tell voters what he intends to do only when he gets into office. That has led to research, much of it admittedly speculative, by think tanks like the Tax Policy Center and other tax experts suggesting that for Romney’s tax plan to work, he would have to eliminate popular tax breaks like the mortgage interest deduction, charitable deductions, and deductions for state and local income taxes, at least for upper-income taxpayers (see Romney Tax Cut Works Only When Mortgage Deduction Mostly Reduced and Romney Defends Tax Cut Plan).
Romney has adamantly argued that his plan would not lead to higher taxes for the middle class, while his Democratic opponents have countered that wealthy taxpayers would be the main beneficiaries of the lower tax rates he has proposed.
Romney, like his running mate, House Budget Committee chairman Paul Ryan, R-Wis., has been vocal about “broadening the tax base.” This was one of the goals of the 1986 Tax Reform Act, which did indeed eliminate many corporate tax loopholes, at least for a while, thereby expanding the tax base. But nowadays the phrase “broadening the tax base” is often used in conjunction with calls for more people to pay federal income taxes, with nearly half the population accused of paying no taxes at all. Of course, that’s not really true, as many of those who end up paying no net federal income taxes oftentimes do pay sales taxes, Social Security and Medicare payroll taxes and other forms of taxation. In a recently released video from a campaign fundraiser, Romney accuses the 47 percent of the population who pay no federal income taxes of not taking responsibility for their lives and says he can't worry about them.
However, those who qualify for refundable tax credits like the Earned Income Tax Credit are rightly fearful that the phrase “broadening the tax base” could mean ending the EITC as we now know it. The EITC actually was expanded because of the deal that President Reagan struck with Congress back in 1986 to get his landmark tax reform legislation passed. He was willing to trade lower tax rates for tax breaks like the EITC, which up to then had covered relatively few people since its introduction in 1975.
It would be unfortunate if the legacy of that tax reform, in which both parties managed to come to an agreement with the President (imagine that) were lost in a misguided effort to cut the deficit and taxes on the wealthy. Instead, by “broadening the tax base,” such proposals would end up eliminating tax breaks for those who are struggling the most in today’s difficult economy.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access