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Today's Top News
Study: Gingrich Tax Plan Would Give Lion's Share to the Rich
DES MOINES, Iowa — Newt Gingrich's proposed overhaul of the tax code would cut taxes for all American taxpayers, particularly the wealthy, according to an analysis released Monday by the non-partisan Tax Policy Center.
Gingrich's plan would provide small tax cuts to those at the bottom of the income ladder, giving those making less than $10,000 an average cut of $222 under one scenario, the analysis found. The Tax Policy Center is a joint project of the Brookings Institution and the Urban Institute, two respected think tanks in Washington.
Gingrich's plan would be most generous to those making more than $1 million a year, delivering an average tax cut of almost $614,000 a year. At the same time, it would give them with a lower overall federal tax rate — 11.9 percent — than most people making less money, that is, everyone making between $40,000 and $1 million.
With Gingrich leading the field in polls for the 2012 Republican presidential nomination, his tax proposal sets up a stark contrast in a potential showdown with Democratic President Barack Obama, who wants to raise taxes on wealthier Americans, not cut them.
"Gingrich's option would be a win for most households," concluded Howard Gleckman, editor of the Tax Policy Center's blog, TaxVox.
But the delivery of the largest tax cuts to wealthier Americans while potentially adding to the deficit and debt — it would deliver $850 billion less in revenue to the treasury in 2015 than current policy would — might make it harder to sell as a political winner to all voters.
"A plan such as this seems tailor-made for anti-tax Republican primary voters," Gleckman wrote. "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."
Gingrich's campaign did not comment on the analysis Monday. In a Republican debate Saturday in Iowa, Gingrich said his tax plan would immediately boost the economy, draw investment from overseas and "begin to dramatically create jobs."
Gingrich proposes to give Americans a choice between the current tax system and an optional flat tax.
His alternative system would apply a 15 percent flat income tax to all income after a family subtracted $12,000 for each person, the interest they paid on their home mortgage and contributions to charity. They also would get the child tax credit and earned income tax credit already in law.
He would not tax long-term capital gains, qualified dividends or interest income. He proposes to repeal the estate tax on large estates. He also would slash corporate income tax rates from 35 percent to 12.5 percent.
Assuming that Gingrich gets his way and extends the Bush-era tax cuts permanently, his plan would cut taxes for all taxpayers:
_ For those making less than $10,000, an average cut of $222;
_ For $10,000 to $20,000, an average cut of $247;
_ For $20,000 to $30,000, an average cut of $488;
_ For $30,000 to $40,000, an average cut of $751;
_ For $40,000 to $50,000, an average cut of $985;
_ For $50,000 to $75,000, an average cut of $1,847;
_ For $75,000 to $100,000, an average cut of $3,050;
_ For $100,000 to $200,000, an average cut of $5,799;
_ For $200,000 to $500,000, an average cut of $20,745;
_ For $500,000 to $1 million, an average cut of $76,995;
_ For $1 million and above, an average cut of $613,689.
Some of the escalation in cuts reflects the fact that wealthier Americans pay a higher percentage of their incomes under the country's current progressive tax code. Thus, a flatter tax saves more for those at the top.
Also, Gingrich proposes to eliminate the estate tax, which hits only the very wealthy. And he would eliminate taxes on capital gains, which are largely paid by higher income people.
The overall effect: The Gingrich plan would cut federal taxes for those making less than $10,000 by 0.6 percent. It would cut federal taxes for those making more than $1 million by 19.7 percent.