Wednesday, August 1, 2012

Mitt Romney's Version of Tax Reform Will Raise Taxes on the Middle Class #p2 #tcot

""Revenue-neutral tax reform" is the holy grail of tax wonkery. The idea is to eliminate distorting tax deductions and use the revenue raised to lower distorting headline rates. In the end the government has the same amount of money and the economy can grow faster. But there's actually substantial ambiguity around what constitutes a distorting tax deduction.

The 1986 tax reform compromise worked out between Ronald Reagan and congressional Democrats, for example, equalized the tax treatment of investment income and labor income and considered that part of base-broadening. Since 1986, however, we've gone back to giving a strong tax preference to investment income and Mitt Romney's version of tax reform involves keeping those preferences in place. As a new Tax Policy Center analysis shows, with that constraint in place the kind of revenue-neutral tax reform Romney is talking about becomes strongly regressive:"


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