August 01, 2012

Study: Mitt Romney's tax plan could save millionaires $87,000 and raise taxes on the middle class

Picture 18The nonpartisan Tax Policy Center produced an analysis that incorporates Republican presidential candidate Mitt Romney's plan and has concluded that it could save the rich lots of money and actually cost other taxpayers a little bit more.

Romney wants to slash income tax rates by 20 percent for all taxpayers. And, because the rich pay more in taxes, they would therefore save more. But, in order to ensure that the plan doesn't increase the budget deficit and national debt, Romney says he wants to eliminate tax breaks. But he hasn't named them.

But most of the big-dollar tax breaks disproportionately help the middle class who get write-offs for, say, employer-provided health insurance, state and local taxes or mortgage interest.

Eliminate or seriously cut back those subsidies and it could cost people more money in the end, the report showed, even though it intentionally biased its assumptions in Romney's favor.

So a person with taxable income of $50,000-$75,000 would see an average net tax increase of $641 (saving $984 from Romney's policies, but losing $2,672 from the elimination of tax write-offs and subsidies).

A person with a $1 million or more taxable income would see an average net tax decrease of $87,117 (saving $175,961 from Romney's policies, while losing $88,444). The numbers are contained in the graphic above.

"Our major conclusion is that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers," the authors wrote. "This is true even when we bias our assumptions about which and whose tax expenditures are reduced to make the resulting tax system as progressive as possible. For instance, even when we assume that tax breaks – like the charitable deduction, mortgage interest deduction, and the exclusion for health insurance – are completely eliminated for higher-income households first, and only then reduced as necessary for other households to achieve overall revenue-neutrality– the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households."

The Romney campaign has yet to comment. It has refused to this point to give specifics about how his tax plan would work -- that is, would tax preferences he would eliminate. However, Romney supporters are sure to note that the study doesn't include budget cuts, which would offset the need for eliminating tax breaks.

But Romney hasn't done much in specifiying his cuts, either. He wants to boost defense spending. And he has criticized Obama for cutting Medicare in ObamaCare, suggesting he wants to leave this alone. His Social Security plan isn't in depth, either. So savings there are unclear.

President Obama's campaign has weighed in with a study of its own. One focused on Florida and claims that Romney's plan "could result in a tax increase for 7.6 million families in Florida. Second, Romney has made it explicitly clear that he would roll back tax cuts President Obama has signed into law and is fighting to extend, a move that would raise taxes on 18 million working families – including 1.2 million in Florida. Finally, in addition to making the Bush tax cuts for millionaires and billionaires permanent, Romney would add another $5 trillion in new tax cuts weighted to the wealthiest, and says he has a secret plan to close tax deductions and other benefits to pay for it. While the impact of Romney’s plan cannot be known for certain, the Florida households earning between $50,000 and $200,000 a year that might be impacted by Romney’s plan include: 1,115,000 Florida households paying off their mortgages; 1,124,000 Florida households making charitable contributions; 1,319,000 Florida households deducting their state and local taxes; and 1,771,000 Florida households who are not taxed on the health benefits they get through their jobs."

There's a high chance Obama will emphasize the potential problems with Romney's tax plan when the president visits Orlando tomorrow.

The Romney campaign might be willing to ignore this issue, banking on the notion that voters trust Republicans more than Democrats on taxes and deficits. Consider that Obama said he'd cut the deficit in his first term, but instead the opposite happened. Romney's campaign could also be waiting until later in the campaign (Romney technically hasn't been nominated yet at the Republican National Convention) to release more specifics on Romney's timetable.

Eventually, Romney's probably going to have to answer the question: What are the numbers?

A few Republican and conservative tax analysts haven't yet been able to answer that, either. While lacking data to refute the Tax Policy study, some accuse it of liberal bias because it's a joint project between the Urban Institute and the Brookings Institute, which has a reputation of having liberal leanings. However, one of the directors of the Tax Policy Center is Donald Marron, who was picked by Republican President George Bush in 2008 to serve on his Council of Economic Advisors.

Ryan Williams, a spokesman for Romney, Tweeted this about study co-author Adam Looney: "Looney, co-author of @BarackObama's "non-partisan, independent study" was also a senior tax economist in the Obama White House."

The Romney campaign on Nov. 4 had a different view of the Tax Policy Center when it examined Republican rival Rick Perry's plan and called the study an "Objective, Third-Party Analysis."

The Romney campaign followed up later and faulted the Tax Policy Center for not factoring in budget cuts or the value of corporate-income tax cuts. But the center notes that the economic assumptions of the Romney campaign are unprecedented because big corporate tax cuts have never been shown to raise revenue.

"This isn't bias. These are numbers," said Looney. "It's pretty plain math. It really is just algebra."

Picture 1Looney acknowledged that the study didn't analyze budget cuts, which is an even larger and more complicated issue, that could offset the need for eliminating tax preferences in the event of a 20%-across-the-board tax-rate cut. He noted that Congress is already grappling with cutting the budget now and that current revenues aren't high enough to keep pace with spending. That's why they analyzed the tradeoff with tax preferences.

"If you cut tax preferences," he said, "you're cutting basic middle-class benefits." (See the pie chart for the percentage breakdown of these popular tax preferences by type).

Download Tax Policy Center Study

Download Obama Study

 

March 29, 2012

Scott pens letter to New York CEOs: 'Do you like paying higher taxes?'

Gov. Rick Scott’s big announcement on national TV on Thursday? He’s writing a letter to New York’s top CEOs, asking them to move their companies to Florida.

On a much-hyped appearance on Fox News’ Your World with Neil Cavuto, Scott’s big reveal was a letter he wrote to New York’s top 100 CEOs, letting them know that they’d be wise to leave New York’s high-tax business climate and come to the Sunshine State.

His letter begins: “Do you like paying higher taxes to do business in New York? As a former CEO and entrepreneur, I know my answer to that question is absolutely not. After meeting with several business leaders in New York this week and hearing about the issues they face, I am convinced that every company in New York should be doing business in Florida.”

The letter goes on to highlight the various business advantages Florida has over New York.  

Continue reading "Scott pens letter to New York CEOs: 'Do you like paying higher taxes?'" »

March 28, 2012

Gov. Scott signs economic development package, billion-dollar savings for businesses

Flanked by leaders of Florida's top economic trade groups and agencies, Gov. Rick Scott signed a number of business tax cuts he says will accelerate economic development in the state.

“The passage of my jobs passage is a great example of all of us working together to make Florida the best state to live and do business,” he said Wednesday.

The economic development package includes more than $1 billion in tax cuts for businesses over the next three years. It features broad cuts of the unemployment tax and the corporate income tax, and targeted reductions for manufacturers, private plane repairers, and fruit and meat packers.

Scott said it’s difficult to say definitively how certain targeted tax cuts will lead to job creation, but noted that the package helps make Florida a more competitive state for business expansion.

“If we want employers to hire more people, we’ve got to think like they do,” said Scott, a former CEO. “We’ve got to keep their costs as low as they can. We’ve got to make sure that we’re more competitive than any jurisdiction in the world.”

The public signing is the latest in a public relations push by Scott to shape the discussion about the job he's done as jobs governor.

Continue reading "Gov. Scott signs economic development package, billion-dollar savings for businesses" »

March 11, 2012

In Legislature's tax-cutting spree, well-connected businesses win out

TALLAHASSEE -- William Ibarra was pleasantly surprised to learn that the taxes he pays at his small Miami charter flight company would be slashed by thousands of dollars, after the Legislature last week passed a slew of business tax cuts.

Frank Stronach, a billionaire horse breeder whose Gulfstream Park racino has a team of nine lobbyists in Tallahassee, could save millions. He is likely to benefit from corporate tax cuts for his businesses and a $1.2 million tax break carved out specifically for a slaughterhouse he is building near Ocala.

From shop owners, who know little about Tallahassee politics, to the powerful business lobby that thought up many of carefully crafted tax breaks, the Legislature this year proved a friendly place.

The total package of business tax relief approved during the 60-day legislative session that ended Friday totaled about $750 million this year, and more than $2.5 billion over the next three years.

Everyday consumers received a much smaller package of direct tax relief — another back-to-school tax holiday, small homestead exemptions and no tax increases. The Legislature was also less ambitious in providing direct economic relief for struggling homeowners, and delivered bone-deep cuts to several programs.

Backed by businessman-turned-governor Rick Scott, the business-friendly tax plan has been touted as a surefire way to bring Florida’s wounded economy back to life.

“If we put Florida companies in the position where we can outcompete companies in any other state, in any other country, what happens?” Scott asked during his State of the State speech in January. “Jobs are going to grow like crazy.”

 Here's a breakdown of the tax relief measures that passed this year.

--@ToluseO

 

March 08, 2012

Last-minute amendment could provide $800 million in tax relief for business

Since 2009, Florida has borrowed more than $2 billion from the federal government to help make payments on unemployment compensation claims. 

A recently filed amendment would slow down the repayment of that huge debt in order to provide businesses additional tax relief worth $800 million over the next three years.

The payments would be shifted into the second half of the decade, while the trust fund used to pay claims would be left underfunded, likely until 2018. If another recession happens in the meantime, the state would probably have to go back to the feds, hat in hand.

Last month, Florida lawmakers passed a series of memorials urging Congress to curb spending and reduce its debt in order to get its finances in shape.

Meanwhile, the state’s unemployment tax debt to the federal government continues to balloon. Florida had to pay more than $56 million in interest on the federal government loan last year, and the feds have been cracking down on the leveraged state by reducing credits.

Now, a business-friendly amendment could increase that debt, while giving companies an $800 million break in the final days of the legislative session.

On Thursday morning, Sen. Ellyn Bogdanoff, R-Fort Lauderdale, slipped an amendment onto an unemployment compensation bill (HB 7027) that would save companies as much as $350 million this year. Chiefly backed by a coalition of business groups, the amendment would require Florida to delay its plan to shore up its UC finances by reducing the base wage used to calculate the UC tax, and increasing the recoupment timeline.  

Continue reading "Last-minute amendment could provide $800 million in tax relief for business" »

March 04, 2012

State budget talks move forward, but biggest sticking points remain

State lawmakers made significant headway on the budget Saturday, reaching consensus on economic incentives and spending on transportation, prisons and law enforcement.

But they had yet to find a compromise in the two most controversial parts of the spending plan: education and health and human services.

“We just opted not to go through that first,” House Budget Chairwoman Denise Grimsley, R-Sebring, said. “We’ll get to it, hopefully, tomorrow.”

The chambers must align their budgets by Tuesday to bring the Legislative session to a timely close. The Senate had proposed a $71 billion budget. The House version was $69 billion.

On Saturday, lawmakers agreed on an $86 million package of economic incentives aimed at bringing companies to Florida.

After initially disagreeing on how much power Gov. Rick Scott should have over the pot of incentive money, the Senate and House came together on an agreement to give the governor $61 million to use as he sees fit. An additional $25 million in incentives — grants, tax cuts and the like — would have to be approved by legislators.

Story here

 @ToluseO

 

February 22, 2012

Tax cut for Marlins stadium passes, despite constitutional problems

Ignoring warning signs by their own staff that a tax cut for the Miami Marlins stadium parking garage is probably unconstitutional, the House Committee on Economic Affairs passed the proposal, unanimously and without debate.

staff analysis landed yesterday that cast serious doubt on the constitutionality of the plan –- which would cover up for a poorly inked deal with the Marlins that left the city of Miami on the hook for $1.2 million in property taxes.

Rather than changing the language to address the constitutional problems, the bill sponsor, Rep. Matthew Caldwell, R-Lehigh Acres, filed an amendment making the proposal retroactive to the 2012 tax bill, in effect doubling down on the constitutionally-questionable measure.

The Marlins parking garage section of the bill, filed by Rep. Jose Diaz, R-Miami on behalf of Rep. Carlos Lopez-Cantera, R-Miami, would exempt the city of Miami from paying property taxes.

It’s the Legislature’s latest move that critics say bucks the state’s Constitution.

Continue reading "Tax cut for Marlins stadium passes, despite constitutional problems" »

February 16, 2012

"Robbing Peter to pay Paul?": Money from online taxes could go to new biz tax cuts

Florida lawmakers voted to move forward a proposal that would force online-only companies—and people who buy goods on the Internet—to pay the state’s 6-percent sales tax. 

Once shunned by conservative legislators averse to new taxes, the proposal has been packaged in a new “revenue neutral” form, meaning whatever money brought in by new taxes would be offset by tax cuts. Until now, it was widely believed that the money would go back to consumers in a new tax holiday.

However, a new amendment to the bill’s language allows for Tallahassee lawmakers to decide who gets the break. In the business-friendly climate of the Legislature, the money could go to reducing taxes on businesses, not directly to consumers. On Wednesday, the House passed a $120 million package of tax cuts on businesses, ranging from reductions to the corporate income tax to reducing taxes on private plane repair.

According to Sen. Nancy Detert, R-Venice, the bill's sponsor, the online tax revenue should go to cutting business taxes.

Continue reading ""Robbing Peter to pay Paul?": Money from online taxes could go to new biz tax cuts" »

February 15, 2012

Gov. Scott's biz tax-cut plan clears House

Gov. Rick Scott’s $120 million business tax cut plan passed the House by a wide margin Wednesday, a day after partisan bickering dominated debate on the issue.

The tax plan, a priority of Scott (Download ScottTaxPriorities), would double the corporate income tax exemption, from $25,000 to $50,000, meaning 3,770 companies would be exempt from paying any income taxes.

Scott has said he would like to completely phase out the state’s corporate income tax, in order to make Florida more business-friendly. Companies paid nearly $2 billion in state income tax last year, about 8 percent of all revenue collected by Florida.

Several other parts of the tax package would cut costs for thousands of businesses and reduce revenue in the state. The measures would slash taxes on oil drilled in Florida (by $3.3 million), manufacturing equipment ($56.4 million), private plane repair ($12.3 million) and electricity at produce packing houses ($1.1 million).

Continue reading "Gov. Scott's biz tax-cut plan clears House" »

February 12, 2012

State legislators opt for tax cuts the easy way; Locals left with the bill

The Florida Legislature is eyeing even more tax cuts this year, celebrating its free-market ethos by slashing business taxes and allowing consumers to “keep more of their own money.”

But as lawmakers take credit for handing out tax cuts to businesses and homeowners, most are not coupling the revenue reductions with equal-sized cuts in spending, leaving local governments to sort out how to balance their budgets.

“We’re trying to take credit for cutting taxes when we’re, in essence, really just telling somebody else ‘You need to cut,’” Rep. Fred Costello, R-Ormond Beach, warned fellow lawmakers during a committee meeting where lawmakers approved more than $600 million in cuts to local governments.

In total, the Legislature has advanced proposals for several billion dollars in new unfunded tax cuts that, if passed, will come out of the coffers of cities and counties across the state. Local governments, which have hired lobbyists to fight back against some of the cuts, say state lawmakers are leaving them with a bleak choice: Either cut already-pared-back services and salaries to offset billions of dollars in reduced revenue, or raise property tax rates to cover some of the shortfall.

Read the rest of the story here.
--@ToluseO