Tax policy is always a heavily discussed topic in election years. But before you blindly subscribe to either candidate's tax promises, you may want to consider that neither Romney's nor Obama's tax plan adds up mathematically.
Romney's Tax Plan:
Romney claims that he will reduce, or in some cases eliminate, most taxes. More specifically, Romney has claimed that he will:
- extend the Bush era tax cuts;
- reduce individual tax rates by some twenty percent;
- largely eliminate taxes on dividends and capital gains;
- repeal the estate tax;
- repeal the alternative minimum tax; and
- reverse Obama's healthcare reform tax.
Unbelievably, Romney claims that he can do all of this and yet still retain the progressivity of the current tax system. Of course, Romney has not yet revealed how he will implement these tax initiatives without adding to the existing deficit or converting the U.S. tax system to a regressive system. This is not surprising. After all, the sum cannot be greater than the parts that make it up. In this case, it would be literally impossible to implement all of these tax cuts while simultaneously retaining progressivity and reversing the national deficit.
Obama's Tax Plan:
Obama's signature tax proposal is the millionaire's tax, which would require Americans earning more than $1 million to pay some minimum tax rate. But while the millionaire's tax is good political speech, such a tax would affect less than 450,000 Americans in practice and generate a relatively small amount of revenue in relation to the national deficit. Yet, Obama claims that he will be able to raise some $206 billion over a ten year period in large part by eliminating the Bush era tax cuts and imposing a millionaire's tax. Of course, Obama has yet to reveal how these various tax initiatives will add up to $206 billion in the aggregate. This is not surprising. Again, the sum can only be as great as the parts that make it up. And in this case, $206 billion is literally not mathematically possible based on Obama's tax proposals.