Gingrich Versus Romney, the Tax Proposals. Who Ya Got?
The presidential election is a mere nine months away, and while the man torepresent the Republican party in its quest to unseatPresident Obama is still anyone’s guess, most pundits agree it will come down to either former House Speaker Newt Gingirch or Mitt Romney, the former Governor of Massachusetts.
Whilethe months to come will surelyflush out each candidate’s stance on hot-button issueslike foreign policy, homeland security,and public breastfeeding, we here at Double Taxation concern ourselves with tax law, and only tax law. And though both Gingrich and Romney have foundtheir personal tax returns at the center ofcontroversy in the past few weeks, we’re of the view that not enough attention has been paidto the tax proposals eachcandidate would seek toimplement shouldthey be elected president.
As a result, we’ve culled through each candidate’s published proposals and campaign rhetoric in an attempt tocreate a comprehensive comparison oftheirrespective plans for tax reform, culminating in this “Tale of the Tax Tape,” if you will. We’ll spare you the commentary, however,as the determination of the“best” plan requires an independent analysis based oneach individualvoters”political, social, and religious values.
|
Newt Gingrich |
Comparison of Key Tax Considerations |
Mitt Romney |
| Remain at 35%; 15% if optional “flat tax” is elected (see fn iv) |
Top Ordinary Rate [i] |
Remain at 35% |
| Remain at 15%; 0% if optional “flat tax” is elected (see fn ii) |
Long Term Capital Gains Rate [i] |
0%for taxpayers with AGI < $200,000; 15% for everyone else |
| Remain at 15%; 0% if optional “flat tax” is elected (see fv ii) |
Qualified Dividends Rate [i] |
0%for taxpayers with AGI < $200,000; 15% for everyone else. |
| Taxed at ordinary rates; 0% if optional “flat tax” is elected (see fn ii) |
Rate on Interest |
0%for taxpayers with AGI < $200,000; ordinary rates for everyone else. |
| Offer individual taxpayers an optional 15% flat tax[ii] Please see footnote ii,as this is a critical part of the Gingrich tax platform. |
Tax Code Reform |
Start with the Bowles-Simpson Commission[iii] approach; lower rates and broaden the tax base |
| Eliminated |
Estate Tax [iv] |
Eliminated |
| Maximum 12.5% rate |
Corporate Income Tax [v] |
Maximum 25% rate |
| Switch to a “territorial system“[vi] |
International Tax Reform |
Switch to a “territorial system” |
| Full expensing of capital expenditures permitted |
Capital Expenditures |
100% bonus deprecation extended 1 year |
| No tax on corporate capital gains; eventually replace payroll tax with personal accounts |
Miscellaneous |
Would end the American Opportunity tax credit for college education; lower payroll taxes |
[i] Neither Gingrich nor Romney propose to allow the Bush tax cuts to expire. Were they to expire,the top ordinary income rate is slated to return to 39.6% on January 1, 2013. In addition, qualifieddividends will again be taxed at ordinary rates — as opposed to the current 15% — and long-term capital gains will be taxed at a 20% rate as opposed to the current 15% rate.
[ii] In what may be the most important aspect of Gingrich’s plan, taxpayers could elect to forego the complexities of the Code in favor of a flat 15 percent tax rate regardless of income. Under this alternative calculation, all capital gains, interest income, and dividends would be tax-free, while nearly all deductions and credits would be abolished, except for the deductions for mortgage interest and charitable contributions and the earned income, child and foreign tax credits. The AMT would be eliminated, and all taxpayers would have the option of a $12,000 standard deduction. The idea is to create simplicity; taxpayers would be able to pay their taxes by mailing a postcard to the IRS with the necessary calculation, thereby saving considerable time and professional fees.
[iii] Bowles-Simpson was a presidential commission created by President Obama in 2010 to propose ways to cut the federal deficit. From a tax perspective, the commission attempted to simplify the Code while simultaneously raising tax revenue by eliminating many tax deductions.
[iv] The estate tax is currently at 35% for 2011 and 2012, but is slated to return to a 55% rate in 2013.
[v] The maximum corporate income tax rate is currently 35%.
[vi] A territorial systems is one in which income is taxed only in the country in which it is earned. Under its current “worldwide” system, foreign affiliates of American companies are generally taxed on income in their host country. When the earnings are repatriated from the foreign affiliate to a U.S. corporation, tax is paid a second time to the U.S., with a credit given for the tax paid abroad.
