This is a proven strategy that will enable businesses to grow by reinvesting after tax profits and expand the pool of investment capital available to fund new enterprises. Because new and expanding businesses need employees Romney’s plan would result in robust job creation
In the first two debates President Obama and Vice President Biden blasted Romney’s tax cut proposal and in campaign ads they accused him of lying about it based on two false claims:
- The claim that it will slash $5 trillion in government revenue. The first post in this series debunks this claim.
- The claim that it is intended to reduce the tax burden on the rich by imposing a greater burden on the middle class. But Romney’s plan, posted on his website proposes to reduce all tax bracket rates as shown in the table to the right.
In the first debate, after President Obama twice accused him of favoring the rich Romney responded (emphasis added):
My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high- income people.
A couple of minutes later he said it again (emphasis added)
…Number two, I will not reduce the share paid by high-income individuals. I — I know that you and your running mate keep saying that, and I know it’s a popular things to say with a lot of people, but it’s just not the case
Paul Ryan said the same thing again in the Vice Presidential debate. The Obama campaign and it’s media supporters cite speculation in a “study” from one left leaning think tank, that a shortage of tax revenue from the rich would force a tax increase on the middle class.
But historical data show that after major tax cuts like Romney proposes the share of taxes paid by high income people and the amount of tax revenue collected from them has increased. IRS data show that in 1981 the year before the phase-in of the Reagan tax cuts began, the top 4% of taxpayers provided 20.4% of all income tax revenue. Five years later, after the Reagan tax rates had been fully implemented, a smaller group, the top 3% were providing 36.1% of all tax revenue. [Continued below the chart]
The chart above shows, in Romney’s words, “the share of taxes paid by high income people” It tracks the percentage of all income tax revenue that was provided by taxpayers earning over $500,000. Since 1999 this group has consistently been 2% to 3% of all taxpayers. They paid a smaller share of total income tax revenue before than after the Bush tax cuts were enacted in 2003.
The share of taxes paid by the wealthiest declined after 2007 because the recession reduced their taxable income from investments and business ownership. While 2009 is the latest year the IRS has reported these statistics, other data from the Treasury Dept indicate that the share paid by top income taxpayers has begun to rise again as the economy recovers from recession.
The Bottom Line
Despite the hysterical overreaction from the Obama Campaign and the media Romney’s promise to not reduce the share of taxes paid by high income people is reasonable, based on historical experience and easily achievable.