A proposed tax overhaul by GOP presidential contender Newt Gingrich could cut taxes for all Americans, but those making more than $1 million would receive an average annual tax cut of almost $614,000, new analysis released this week shows.
Analysis conducted by the non-partisan Tax Policy Center (TPC) was released this week showing the Gingrich tax plan is tilted heavily in favor of the wealthy. In addition to the hefty tax cut, those in the more-than-$1-million bracket would get a lower overall federal tax rate of 11.9 percent, a better deal than for those making less money.
TPC, a joint effort of the Brookings Institution and the Urban Institute, also found Gingrich’s tax plan on the corporate level would see the corporate income tax rate fall from 35 percent to 12.5 percent, and it would also allow full expensing of capital expenditures (excluding inventories and residential rental housing).
“A plan such as this seems tailor-made for anti-tax Republican primary voters,” wrote Howard Gleckman, editor of TPC’s TaxVox. “But if Gingrich wins the nomination, he may not have such an easy sell to independents, who may wonder why adding a $1 trillion a year to the deficit is a good idea, especially when so much of the tax cut goes to a handful of very rich households.”
TPC noted the Gingrich tax plan “would reduce federal tax revenues dramatically.” In calendar year 2015, Gingrich’s proposal would see the federal tax liability lowered by $1.28 trillion compare with the current tax law. This equates to a “roughly 35 percent cut in total projected revenue.”
The analysis shows the Gingrich tax plan would generate $850 billion less in treasury revenue in 2015 than the current tax policy and comes after federal lawmakers on both sides of the political aisle have repeatedly failed to reach agreement on how to reduce the country’s massive deficit.
Those lawmakers have been attempting to cut the budget deficit by 3 to 4 trillion dollars over a 10-year period, but the Gingrich plan goes in the opposite direction, “with gusto,” according to Robert Reich. Professor of Public Policy at the University of California at Berkeley and former secretary of labor under the Clinton administration, Reich added, Increasing the deficit by $850 billion in a single year is beyond the wildest imaginings of the least responsible budget mavens within a radius of three thousand miles from Washington.
Also in the Gingrich tax plan is a permanent repeal of the federal estate tax, along with surtaxes in the 2010 Patient Protection and Affordable Care Act (PPACA).
The Gingrich campaign did not offer an immediate response to the analysis, but McClatchy reports the overall effect of the Gingrich tax plan as such: those making less than $10,000 will see their federal taxes cut by 0.6 percent, while those making more than $1 million would enjoy a 19.7 percent cut in federal taxes.
Gingrich currently sits at or near the top of recent polling as the GOP contenders ready themselves for the Iowa caucuses on January 3.