Romney tax plan: How rich could pay the 'same' and still pay less

Romney promises to make the rich keep paying a constant percentage of all US income taxes. That's very different from asking them to pay a constant share of their earnings.

By Mark Trumbull,?Staff writer / October 22, 2012

In this Oct. 16 photo, Republican presidential candidate Mitt Romney speaks while President Obama listens during the second presidential debate at Hofstra University in Hempstead, N.Y.

David Goldman/AP

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A centerpiece of Mitt Romney's campaign for president, his plan for tax reform, revolves around a puzzling set of assertions. He says the rich will pay "the same" under his plan. He says the middle class will get "some relief." And yet he also says his tax reform won't add to federal deficits.

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To lots of Americans this sounds, well, unusual. If one big chunk of taxpayers pays the same, and the other big chunk pays less, how can federal revenue stay the same?

This conundrum represents a large gray area in Romney's economic plan. Those listening to the Republican presidential candidate have rushed in to fill the void with various assumptions that may or may not prove to be correct.

Some voters reckon that Romney is implying, if anything, that he'd be willing to see a modest tax hike for upper income Americans, in order to cover the cost of modest middle-class tax relief. Others assume that, if elected, the former Massachusetts governor would be less than strict about the goal of not adding to federal deficits. Others argue that, contrary to the appearance of his rhetoric, Romney plans big tax cuts for the rich.

Some policy experts say Romney's own language offers hints that the last interpretation may be correct ? and that if Romney's plan were enacted, the top 5 percent of households appear likely to reap significant gains from the changes. This could occur, potentially, even if the reforms also delivered on Romney's stated goals of middle class tax relief and not adding to federal deficits.

Roberton Williams, a finance expert at the nonpartisan Tax Policy Center, says it may be vital to consider precisely what Romney has been saying: The candidate promises to make the rich keep paying a constant percentage of all US income taxes. That's very different, Mr. Williams says, from asking the rich to pay a constant share of their own earnings in income taxes.

If incomes for the rich continue to rise faster than for the middle class ? as has been the recent historical pattern ? then the rich could pay a constant share of federal income taxes even as the effective tax rate on their income steadily fell over time.

"In order to properly evaluate the 'fairness' of a tax system, you have to compare tax burdens to income levels, or ability to pay," says Diane Lim Rogers, chief economist at the Concord Coalition, a group that champions fiscal responsibility. By contrast, she says via email, a focus on the "share of taxes paid" can be tricky or misleading.

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/hHrpRAwp1bs/Romney-tax-plan-How-rich-could-pay-the-same-and-still-pay-less

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