We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
With the Republican primaries now in full swing, the GOP candidates’ rhetoric on taxes has become even more disconnected from reality.
Santorum is No Blue-Collar Populist
Former Senator Rick Santorum used his new spotlight during last Saturday’s ABC-Yahoo GOP presidential candidate debate to highlight his plan to cut the corporate tax rate in half and eliminate the tax entirely for domestic manufacturing. Santorum explained the need for cutting the 35 percent tax rate by arguing that our corporate tax rate is the “highest in the world.”
While we have the second highest statutory corporate tax rate on-paper, the excess of tax breaks and loopholes in our corporate tax code make it so the effective corporate tax rate (the amount actually paid) is close to half of that. In fact, the US actually has the second lowest level of corporate taxes, as a share of its overall economy, of any developed country in the world.
Although Santorum promotes the populist aspects of his tax plan, the truth is that the majority of his proposed tax cuts would go to the richest five percent of Americans. A new analysis by Citizens for Tax Justice shows that his tax plan would provide an average tax cut of $217,500 to the richest 1 percent, which is over 100 times the size of the average tax cut the middle fifth of Americans would receive.
Gingrich on a Tax By Any Other Name
Former House Speaker Newt Gingrich usually offers nothing but hot air when it comes to taxes, but this week the Gingrich campaign brought up an interesting point in a new campaign ad attacking Romney for raising user fees in Massachusetts. The ad uses Romney’s support of user fees to question his anti-tax credentials because it says that user fees are essentially a “tax by another name.”
Of course, Gingrich’s ultimate conclusion is mistaken in that he assumes Romney should not have raised user fees or taxes but should simply have left public services unfunded.
But Gingrich’s criticism nonetheless acknowledges the trend among even the most infamous anti-tax governors to substantially increase user fees to avoid officially raising taxes. In fact, since 1979 virtually every state in the nation has begun to rely more heavily on user fees to raise revenue.
Huntsman’s Tax Loophole Consolidation Plan
Rhetorically, former Governor Huntsman hit it out of the park during the NBC-Facebook GOP presidential candidate debate last Sunday by declaring that we need to “say so long to corporate welfare and subsidies” and that our tax code is “chuck full of loop holes and deductions” which weigh it down to the tune of $1.1 trillion.
Unfortunately however, his tax plan, like the other GOP candidates’ tax plans, includes a “territorial” system that would exempt the offshore profits of U.S. corporations from U.S. taxes. This is essentially a way to expand and consolidate the existing loopholes that encourage U.S. companies to shift their investments offshore.
Similarly, Huntsman’s proposed changes to the personal income tax would actually add huge loopholes for the rich by exempting taxes on capital gains and stock dividends. In addition, while his plan would end a substantial amount of wasteful tax subsidies, it would also eliminate invaluable tax credits like the earned income tax credit.
In other words, Huntsman’s plan is more of a tax loophole consolidation plan for the rich and powerful, rather than a tax reform for everyone.