Tuesday, November 6, 2012

Romney Tax Plan Musings

From http://www.bloomberg.com/news/2012-11-05/why-voters-should-fear-romney-s-tax-plan.html

"True, any across-the-board tax cut would give more money to the rich in dollar terms, because they pay most of the taxes in the first place. But Romney’s plan goes further. It would reduce the amount the richest Americans pay relative to their income more than for anyone else. Specifically, the richest fifth would go from paying 26 percent of their income in taxes to 22 percent. The middle fifth would go from 16 percent to 15 percent. The tax burden on the poor would rise."

I wonder if there's any kind of credible evidence as to whether the rise in job creation made by lowering the burden on those rich job creators by 15% would offset the disincentive to work created by raising taxes on the working poor...or maybe we don't really care if the poor would work less because wages would rise for the rest of us as labor demand catches up with/outstrips labor supply. 

Also unclear if the tax burden rising on the poor takes into account benefits.  That is, some analysts treat the benefits phase-out as an additional "tax" on the poor.  If you look at it that way, the tax burden on the poor would increase even more dramatically, as the EITC and other benefits are scaled back.  On the other hand, there wouldn't be as much of a penalty to working created by losing one's benefits, because there would be fewer benefits to lose under a Romney budgetary regime. 

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