Statement of Christine L. Owens, Executive Director, NELP Action Fund:
Presidential candidate Mitt Romney’s tax proposals are a fairy tale that takes the failed policies of former President George W. Bush and magically turns them into shiny pots of gold. The unaffordable, lopsided tax cuts of the Bush years racked up deficits and fostered weak job growth, and we are worse off today because of them. Preserving these rates through the first three years of the Obama administration has failed to create jobs, failed to build a sustainable recovery, failed to lift wages for most Americans and failed to reduce the deficit or ease the explosive economic inequality that threatens our social fiber.
Nevertheless, Governor Romney proposes to make matters worse. His approach would permanently waive taxes on most profits American corporations earn abroad and provide an even greater incentive to move work offshore and exploit foreign tax havens.
He also wants to shave ten points off corporate tax rates, even though the actual taxes many companies pay are already less than the rate he proposes. Between 2008 and 2010, the effective tax rate for 280 of America’s most profitable companies averaged roughly half the current actual rate. And 30 major corporations, including household names like General Electric, DuPont, Verizon Communications and Boeing, managed to bring in revenue and still report negative tax liabilities over that period. Further enriching these companies with even lower rates may boost CEO pay and company profits, but it will not raise wages for workers, create good jobs or contribute to lowering the deficit.
Any modest benefits working and middle class families would see under Mr. Romney’s personal income tax cut proposal would be dwarfed by the benefits showered on the super-rich. Though Mr. Romney claims the 1% would continue to pay as much or more than they currently do because of unspecified limits he’d impose on deductions, it’s hard to imagine that wealthy taxpayers already able to game the system and shelter much of their income from taxation could not manipulate this “base broadening” to their advantage. Mr. Romney proposes no changes in capital gains tax rates for the wealthiest and says only that his administration would “study” the issue. And eliminating the estate tax only benefits those at the top: the current estate tax exempts individual estates smaller than $5 million and married couple estates less than $10 million. Even if 2009 estate tax limits were restored, less than one percent of all estates would be subject to taxation. Claims that small businesses will be forced to shut their doors are spurious; only 1.3 percent of this number of taxable estates are small businesses or farms.
Mr. Romney’s plan would also increase defense spending, make big cuts in other federal spending, and nod to balancing the budget. The only way to sustain the tax cuts and defense increases he proposes is with budget cuts in non-defense spending of between 20% and 48% in 2016 (depending on whether Social Security and/or Medicare are cut and whether his proposals include a balanced budget requirement—both of which are unclear). That will mean deep cuts in programs tens of millions of Americans rely on during a period when the nation is still recovering from a brutal recession.
Tax cuts are not magic beans that sprout good jobs and a miraculous economic recovery. America needs sound economic policies, including reforms that restore fairness to the tax code, investments in workers and in our national infrastructure, and a regulatory environment that encourages growth while respecting workers and strengthening families and communities. Mr. Romney’s economic policies fail these tests.
The NELP Action Fund is a project of The Advocacy Fund.