Republican presidential candidates' tax cuts benefit only the richest Americans
The U.S. is currently mired in a challenging fiscal situation — the annual deficit is over eight percent of gross domestic product and the national debt held by the public is almost 70 percent of GDP. As such, it is imperative that U.S. politicians and policy-makers think critically about how to reduce this looming crisis. Broadly speaking, there are two alternate, yet not mutually exclusive, options from which the nation can choose — cutting spending or raising more revenue from taxes. Looking at the current policies in place and those proposed by the Republican presidential hopefuls affords the public a chance to analyze the revenue aspect of the issue.
President Barack Obama's policies on taxes are relatively clear — removing inefficient tax loopholes (e.g. preferences for corporate jets), reverting tax rates on the wealthiest Americans back to Clinton-era levels by allowing the Bush tax cuts to expire, and preserving tax provisions that either help low-income Americans (e.g. Earned Income Tax Credit) or stimulate economic growth (e.g. Payroll tax holiday). However, given the upcoming presidential election, it is also important to consider various Republican presidential contenders' tax proposals; studying these plans can give us an idea of what a Republican candidate may do if he becomes president.
The most important statement concerning taxes came on Aug. 11 when all Republican presidential nominees declared that they would not accept a deficit-reduction package featuring $10 of spending cuts for every $1 of tax increases. This stubbornness proves that all the nominees are either beholden to Grover Norquist and willing to say anything to secure votes or have a deeply flawed view of how to reduce the nation's deficit. Given such a declaration, it is no surprise that all the Republican primary contenders released tax plans that reduce taxes and increase the deficit and debt.
For example, former Massachusetts Governor Mitt Romney's tax plan will add over $600 billion to the deficit in the fiscal year 2015 alone. Not to be outdone, Texas Governor Rick Perry outlined a tax policy that would raise the deficit by $995 billion in fiscal year 2015. And, as if he wanted to prove he was the biggest tax-cutter, former House Speaker Newt Gingrich unveiled a proposal that would cut federal revenues by $1.28 trillion in fiscal year 2015. These monumental increases in the deficit belie the claim from GOP candidates that reducing the deficit is of paramount importance.
If these unpaid tax cuts were aimed at low-income and middle-income Americans, many of whom are in need of a little support in these tough times, one could make an argument that such tax cuts stimulate economic growth since lower-income people are more likely to spend the savings (in economic terms, they have a higher propensity to consume). Yet, none of the candidates' plans resemble help for those most hit by the recent recession; on the contrary, the plans focus on cutting taxes for the richest Americans.
For example, Romney's plan cuts taxes on the families in the highest quintile by over $6,700 per year, yet raises it on families in the lowest quintile by over $150 per year. Moreover, when describing Gingrich's proposal, Howard Gleckman, a resident fellow at the Urban Institute, said, "Most of the nation's lowest-income families would get no benefit from these tax cuts." Simply put, none of the candidates' tax plans deliver big savings to Americans in the bottom three quintiles. In fact, all plans yield significant benefits for the highest quartile of Americans, and, more specifically, for the top one percent. As the chart below shows, the candidates tax plans have a disproportionate benefit for those earning over $343,927 per year—the top one percent.
The U.S is currently at a dangerous point — we are facing a growing debt crisis that has the potential to undermine the very foundation upon which the nation is built. However, we also are facing a very real crisis — protracted economic stagnation, sustained high unemployment and the possibility of a lost decade — that is destroying our nation. As such, our politicians would do well to implement policies that boost demand, spur economic growth and create jobs, as opposed to simply cutting taxes on the wealthy and hoping for trickle-down economics. Nevertheless, Romney, Perry, Gingrich and Senator Rick Santorum seem determined to follow these unwise policies. In fact, given the significant negative impact of their tax plans on the economy and looming deficit, one has to wonder whether the Republican presidential candidates actually wish to reduce the deficit and grow the economy.
Neeraj Salhotra is a Sid Richardson College junior.
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