Obama and Romney Tax Plans Are Pie in the Sky

Barack Obama & Mitt Romney loaded with 10 point plans

The U.S. presidential elections often produce half-baked proposals to its respective citizens. The campaign websites of President Barack Obama & Republican rival Mitt Romney are loaded with 10-point plans to change everything from education & Social Security to energy policy.

It is not their tax plans. Both offer the same vaguest of plan for the most important issues of our day: What actual size government do we want? How & When will we pay for it? How the burden should is fairly distributed? Instead of engage in serious discussions of such overarching questions like above, the candidates often offer confection.

Romney says he would reduce the taxes most of us which we are currently pay. Were in 2001 and 2003 tax cuts adopt under President George W. Bush government? If we extend them all, then first comes with Individual income-tax rates which was reduces by 20 percent across the board. Then comes with Dividends and capital-gains taxes to eliminate them for most taxpayers as well, and keep the current low rates as well for the high income people.

Moreover, the former Massachusetts governor would end the Estate tax, repeal the alternative minimum tax & ditch the higher tax rates which enacted with Obama’s health care reform legislation decision. Here’s the cherry on top. Romney says he would balance the huge gap between revenue & expense for dollar & still keep the tax code’s progressivity.

Mathematically Impossible

If it sounds too good to be true, that’s because it is wonderful. Romney hasn’t said yet how he would achieve all of this & still not decided how to decrease the deficit or make the tax code less progressive according to existing economy, probably because it’s mathematically impossible to solve the problem like these. A Tax Policy Center study released last week which estimates that such a plan Romney provides so little detail it isn’t possible to precisely score it - would reduce taxrevenue from individuals by $360 billion in 2015.

To get revenue neutrality, Romney’s plan must have an equal amount of reductions in popular choice of tax benefits issue, including the mortgage interest deduction, the exclusion for employer health insurance, the removal for charitable contributions as well, and benefits for low & middle income families such as the earned income-tax credit & child tax credit. For Romney’s plan to make better understand, taxpayers would have to give up 65 percent of their tax preferences, according to the study. It would be politically difficult rather than clawing back that level of tax breaks.

The analysis also shows that Romney’s tax cuts would mostly favor for the upper-income taxpayers. Those who earn more than $1 million, their after-tax income are increased by 8.3 % (for an average tax cut of about $175,000). Taxpayers with incomes between $75,000 to $100,000 would see somewhat smaller increases of about 2.4 percent ($1,800of an average tax cut). The after-tax income of taxpayers earning less than $30,000 would actually decrease by about 0.9 percent (for an average tax increase of about $130). It’s no wonder that Romney doesn’t want to show up detail information, how he would make his numbers add up.

Obama also has a taxplan, and it’s almost as unclear. It can be summed up as “soak the rich.” In keeping with his plan not to raise taxes on the middle class, Obama would extend the Bush tax cuts plan if only on income up to $250,000 for married couples. He would increase another 4.6% tax rate from 35% to 39.6% & end tax breaks for hedge fund and private equity managers.

Most similarly, Obama recommended Buffett rule, according to Warren Buffett, which would require Americans earning more than $1 million to pay an unclear minimum tax rate.

Millionaire’s Tax

The millionaire’s tax would affect about 0.3 percent of taxpayers not than 450,000 people. Based on the Internal Revenue Service, its figured in 2009 that even doubling the tax rate on the richest of the rich would bring in about $190 billion per year, or 1.3 percent of GDP -a far short of the $4 trillion over the10 years. There should have economists & deficit- reduction panels which try to keep the national debt sustainable.

Obama hasn’t spelled out still now where he would find most of those trillions. His budget plan in 2013 would raise $206 billion over 10 years by treating dividends, now taxed at 15 %, as ordinary income for married couples making more than $250,000 a year. Obama has done little to build the support behind it by campaigning, or to advance it in Congress.

With considering the $15 trillion of publicly held debt, as a result he’ll have to break his campaign promise for the upcoming election & go where the money is –is it in the middle class? According to the Tax Policy Center, in 2010, the average federal income-tax rate for a median-income family was 4.55 percent. From the year of 1955 to 2007, that rate hadn’t been lower than 5.34 percent.

Romney must shed his pie in the sky promises as well; while Obama needs to come up with a clean & clear plan for the middle-class Americans by telling them their taxes, now at record-low rates, will need to be increased.