At a recent fundraising event, President Obama referred to Mitt Romney’s proposed tax policy as “Robin Hood in reverse” and coined the term “Romney Hood.” Romney in return referred to Obama’s allegation as “just not true” and coined the term “Obamaloney.” Even though this debate is amusing, and the media has been covering it extensively, it seems like nobody is talking about the real issue—taxes. This post is aimed to remedy this.
Here is what Obama and Romney have in store for taxpayers:
Mitt Romney’s individual tax plan includes maintaining low marginal rates at the same levels they are now, claiming that the decision made by Bush to lower taxes to promote economic growth and encourage saving and investment is still relevant today. He also plans on encouraging Americans to save more for retirement by eliminating taxation on capital gains, dividends, and interest for any taxpayer with an adjusted gross income of under $200,000. Lastly he plans on eliminating the death tax, believing government should not tax the same income over and over again. As far as other taxes that affect small businesses directly, Romney is not promising much. He does plan on lowering corporate taxes, but since those are not relevant to many small businesses, there is no news there. He also did not specify any plan to offer small businesses tax breaks and deductions based upon their energy efficiency, research, hiring, and healthcare. Many criticize Romney’s plan, but a recent report written by Tax Policy Center suggest his tax plan is mathematically impossible. According to their analysis the only way Romney can keep his promise to lower taxes without raising the deficit is by taxing the middle class.
Obama’s individual tax reform plans to cut the deficit by $1.5 trillion over the next decade through the expiration of tax cuts for single taxpayers making over $200,000 and married couples making over $250,000. Obama says he has been strong-armed by the Republicans to extend all of the Bush tax cuts until 2012, but he now plans to return estate tax exemption and rates to 2009 levels. Another big part of Obama’s tax policy is the “Buffett Rule.” The rule suggests that those making over $1 million should pay no less than 30% of their income in taxes. Furthermore, Obama plans on replacing the Alternative Minimum Tax with the Buffett Rule. As far as taxes that are directed specifically at small businesses, Obama is pushing a 100% tax deduction on business investment aimed at creating jobs and does have concrete plans to offer tax deductions for healthcare, energy saving, and research.
Obama’s tax policy is not free from criticism, either. According to Bloomberg it can be summed up as “soak the rich.” Many say his going after millionaires is all politics. The new Buffett rule will affect no more than 450,000 people, and even if their tax rate is doubled, it will only bring in $190 billion a year.
Most people don’t base their vote on only one issue, but in the case of taxes there are serious policy gaps. It makes you (and me) wonder how two so different ways could lead to the same goal—economic growth and deficit reduction.
Would you vote based on tax policy alone? Which plan do you think is better for YOUR small business?