Class Warfare Accusations and the Math Behind GOP Tax Proposals

by: Eric Roberson

Mon Jan 16, 2012 at 07:00 PM CST

Today former Utah Governor Jon Huntsman dropped from the GOP Presidential race.  In doing so, he called the Obama administration's policies and rhetoric "Class Warfare."

The question is does that oft-repeated GOP attack stand up to the mathematical analysis?  

Let's look at the current tax proposals of the remaining GOP presidential field to see if their proposed tax policies exhibit good math skills, and what relationship those policies, and the mathematical impact of those policies on average Americans have to accusations of "Class Warfare" if any.

Summary of Proposed GOP Tax Plans

• Mitt Romney: Romney's features enormous tax cuts, larger than George W. Bush's; 57% of these reductions benefit the top 1% of Americans and 78% benefit the top 5% of Americans; and 40% of Middle Class families with children will pay higher taxes.
• Newt Gingrich/Rick Perry: Both candidates propose Flat Tax plans that lower top tax rates to 15% and 20% respectively.  Perry's plan removes tax loopholes, but Gingrich's plan does not.  So those with more than a million in income save an average $500,000 in taxes a year under Perry's plan and even more under Gingrich's plan.
• Rick Santorum: Santorum's tax plan contains a two-tiered "flatter tax" that lowers the top tax rate to 28%.  Santorum attempts to pay for it with $5 Trillion in reduced social spending.

It is important to note that 40% of our current deficit is based on the Bush Tax cuts depleting federal revenue according to an analysis of the Center on Budget and Policy Priorities .

So here is my question: does standing up against these tax policies that benefit the richest 1-5% of Americans at the expense of the working poor, the middle class, and the deficit amount to class warfare?

Below the fold are the details of each tax plan.  

The report details that "Republican presidential candidate Romney's plan for federal taxation begins with a hefty portion of Bush-era tax policy: Permanently extend all the tax cuts passed in 2001 and 2003, including those that mainly benefit the extremely wealthy. Then Romney layers on a heaping batch of new tax cuts for the rich, including a full repeal of the estate tax-which is currently paid by only the richest 0.14 percent of estates-and a massive corporate tax cut."  

Specifically, Romney's tax plans include:
• TAX BREAKS MOSTLY FOR THE RICH : 57% of the new tax cuts would go to the richest 1%; 21% to the next richest 4% and the remaining 22% of the tax cuts would go to the remaining 95% of Americans.
• TAX INCREASES FOR THE MIDDLE CLASS: Millions of Middle Class families with Children, including 40% of persons with children  making under 100,000 a year,  would see tax increases under Romney's plan;
• MAINTAINING LOOPHOLES FOR CORPORATIONS AND THE RICHEST 1%: Nothing in Romney's plan addresses any of the common corporate welfare tax loopholes that, for example, favor horse breeders, oil companies, or maintain only a 15% tax on "carried interests" that allow Wall Street traders and Venture Capitalists like Romney to effectively pay only 15% while the average middle class family earning 75,000 a year pays an average 25%.

NEWT GINGRICH: According to analysis reported by the Brookings Institute and others, Newt Gingrich's Social Security plan calls for allowing millions of American to remove their funds from Social Security immediately.  Newt's math fails by not calculating the loss of revenues, not replacing those revenues, and/or not clearly identifying benefit reductions.  

As for income taxes, Gingrich's Flat Tax proposal, as detailed in analysis in the Washington Post,
calls for the reduction of the highest income tax rate from the current 35% to the amazingly low rate of 15% for individuals and 12.5% for businesses.  Amazingly, Gingrich's plan does not call for the end to any major deductions.

RICK SANTORUM: There is no published mathematical analysis of Santorum's plan.  However, the Tax Policy Center has noted that because Santorum's plan cuts rates significantly, leaving only a 10% and a 28% rate, but does not eliminate tax breaks or loopholes-and even expands a few - that Santorum's tax plan would increase the deficit and very likely add trillions of dollars to the federal deficit.  Even with a proposed cuts of over $5 Trillion to social services like Medicaid, housing subsidies, food stamps,  and job training,  the math behind the Santorum policy does not add up.  Lastly, because Santorum does give a net tax break to middle class traditional families, at the expense of lower class families that rely on current government programs.  

The details of Santorum's plan include:
• Replaces the current individual rate structure with just two rates-10 and 28 percent
• Lowers rates on capital gains and dividends to 12 percent
• Triples the personal exemption for dependent children and keep the refundable earned income and child tax credits
• Retains tax preferences for charitable giving, mortgage interest, health care, and retirement savings
• Repeals the Alternative Minimum Tax
• Cuts the corporate rate in half to 17.5 percent. Manufacturers would pay no income tax
• Allows full expensing for capital investment
• Increases the R&D tax credit to 20 percent
• Allows multinationals to bring foreign earnings back to the U.S. at a 5.25 percent tax rate but at a zero rate if they used the funds to buy "manufacturer's equipment"

RICK PERRY: Rick Perry's Flat Tax plan calls for a lowering of income tax rates to 20% for both corporations and individuals. However, admitting this will lower tax income, Perry's plan at least ends deductions for mortgages and charitable giving for persons making more than $500,000.  According to tax analysis performed on behalf of the New York Times by the Non-partisan Tax Policy Institute and by the Brookings Institute,  higher income Americans benefit under every analyzed scenario, but the poorest working Americans always lost.    Interestingly, while middle income married families with children with Children took a big hit under the Perry Plan, single parents had a net gain of lower taxes.  

IMPACT ON FEDERAL BUDGETS

What is the net result of each of these plans?  

First, each proposal has one clear winner - the richest 1% of Americans.  

Second, each proposed policy has several clear losers:  1) the federal budget, which will suffer increased deficits; 2) the lower income Americans that will incur both lower levels of social policy spending and in many instances higher taxes; and, 3) in all but a few cases, the Middle Class that will also pay higher net taxes and receive lower benefits.

Now Governor Huntsman, who is engaging in Class Warfare?