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Dueling tax plans: Romney vs. Gingrich

Romney favors the orthodox GOP approach of lowering tax rates and overhauling the corporate tax system. Gingrich's plan is more radical and much more difficult to achieve.

By MSN Money Partner Jan 20, 2012 6:41PM
This post is by John D. McKinnon of The Wall Street Journal. Carolina's roller-coaster primary could help influence more than the GOP presidential nominee -- it could play a big role in determining the direction of Republican policy on taxes for 2012 and beyond.


Just as much of the focus narrows to two candidates, Mitt Romney and Newt Gingrich, the race also offers voters sharply contrasting approaches to tax policy, one that is familiar to Republicans and more achievable, the other newer and farther-reaching.


Romney appears to be sticking with GOP orthodoxy that calls for extending Bush-era tax rates while working toward lowering the top tax rates for corporations and individuals to 25% from the current 35%. That aligns him closely with congressional Republicans. He favors eliminating investment taxes for middle-class filers, including couples with incomes under $200,000, and ending the estate tax. Romney's plan envisions a long-term corporate-tax overhaul that includes a reduction of tax breaks, though he has offered few specifics.


Like other GOP candidates, the former Massachusetts governor also favors rolling back some tax increases passed under President Barack Obama, such as a new levy on investment income to help offset a health-care overhaul.


By contrast, Gingrich, the former House speaker, has embraced more radical changes to the tax code. He would offer taxpayers a choice of the current system or a flat-tax system with a 15% rate and a $12,000 exemption for each individual. The flat-tax system would have elements of a consumption tax, according to tax experts, by exempting investment income. It also would reduce the corporate tax rate to 12.5% and get rid of many deductions, though not the mortgage-interest deduction.


Gingrich's approach is similar in broad strokes to the "9-9-9" plan -- a 9% tax on consumer purchases, a 9% business tax and a 9% flat-rate income tax -- that former business executive Herman Cain proposed while in the GOP race. It promises a big boost to investment and economic growth, at least in the minds of supporters. (Post continues below video.)

But the plan has opened Gingrich to attack for offering big tax breaks for the wealthy. Romney, a wealthy former private-equity executive who has taken hits for his own tax rate of about 15%, has said Gingrich's plan would essentially exempt the likes of Warren Buffett and Bill Gates from any tax.


Analysts at the nonpartisan Tax Policy Center say Romney's proposed reductions in corporate tax rates would disproportionately help wealthier Americans, in part because they are more likely to have investments in corporate stocks.


A third GOP candidate, former Pennsylvania Sen. Rick Santorum, would extend the Bush-era rates and aim for a new tax system with just two rates, 28% and 10%. He would cut the corporate rate in half and eliminate that tax for manufacturers.


Texas Rep. Ron Paul proposes repealing the income tax and doing away with the Internal Revenue Service, while drastically reducing government spending.


Some conservative experts expressed doubt about the ability of achieving radical overhauls any time soon, however, no matter whom the party selects.


If Romney were nominated and then elected president, "we probably won't get radical tax reform because he hasn't promised it and he doesn't seem supportive," said Chris Edwards, tax-policy director of the libertarian Cato Institute. If Gingrich became president, there probably would be more discussion and hearings on radical tax changes.


But "there is unfortunately huge entrenched institutional resistance to something big like a flat tax, so Gingrich would probably have to do reforms in bite sizes anyway, if he placed it as a high priority," Edwards said.


A big wild card is the plans' impact on the federal budget. Gingrich's plan would be the most costly of any candidate's, reducing federal revenue by $850 billion a year by 2015, the Tax Policy Center said. Romney's plan, before he suggested this week the lowering of the top rate to 25%, would cost $180 billion a year by 2015.


The dueling plans point not only to different policy priorities but also to the differing characters of the two candidates. Romney's more achievable plan conforms to his pitch as an executive who could get things done, while Gingrich's burnishes his appeal as a candidate who would bring dramatic change to Washington.


Kevin Hassett, an economist at the conservative American Enterprise Institute and former adviser to 2008 GOP nominee John McCain, said Gingrich's platform is a good starting point for negotiations, "but wouldn't likely ever see the light of day in legislation." By contrast, Romney's plans are likely the proposals he would actually try to legislate, Hassett said.


"I think there is much to recommend both approaches," Hassett added. "I think the big difference is that there is more mystery about what we might actually get out of a Newt presidency."


More from The Wall Street Journal and MSN Money:


Jan 23, 2012 10:32AM
Fire them all, it is time for a third party to take over that works for the people. Big contributors run government and that includes big money from labor unions, rich people, and big business.  Wall Street contributes more to Democrats than Repuplicans and they demonize Wall Street.  It is all a dog and pony show and the American people are left with a bunch of retards running the country.  We are bought out by who spends the to the most money to make us believe their garbage.
Jan 23, 2012 10:28AM

there's only one spending issue



Spend only what you have, and then spend LESS.  Both parties need to embrace this idea

Jan 23, 2012 11:10AM
I've been around the block longer than most and, what you will see is that its all rhetoric. Every election year, tax reform becomes a hot topic. But when the elected President leaves office 4 or 8 years later, basically little has changed. Don't expect this year to be any different.
Jan 23, 2012 12:13AM
When will the D's and R's learn - A dollar spent is a dollar taxed.  There are three ways to pay, taxes, borrowing and inflation.  All of them take money out of the economy.  The economy is the business of America and government is  the overhead.  When a business falters the first thing to  do is to cut overhead.  Instead we grow it.  If you want the economy to grow again, cut government spending.
Jan 20, 2012 9:44PM
Presidents do not cut taxes. Congress does that. Congress has the purse strings. All the talk about cutting the deficit. How much impact will a 1.2 trillion dollar tax cut over 10 years make----not too much at all. The irony is they can't even do that. When it comes to IRS reform/revision, this congress is dead in the water. We're racking up 1 trillion plus deficits year after year with no end in sight. Nothing but talk.
Jan 23, 2012 11:22AM

A lot of our economic woes are due to the fact that the "rich" have taken their manufacturing overseas.  Jack Welch was the poster boy for this.... Now Obama seeks his council to fix things???  Helloooo!

The fallacy of the push for a "service based economy" has come home to roost.   You asked for it, you got it.

Jan 21, 2012 2:53PM
The Republican solution always seems to be cutting taxes and in every case the top 1% would be the greatest beneficiaries.  This has been going on for the past two decades and although we are told this is necessary since the 'rich' are the job creators the irony is that 2000-2010 was the first decade since the 1930's with zero job growth and although federal taxes are at their lowest rate right now job growth continues to be pathetic.  So if there is a correlation between tax rates and job growth why did we have much higher job growth rates with higher taxes in the past?

One area where Romney is right (Huntsman also talked about this) was reforming the tax code which is over 54,000 pages long!!!  (Cato Institute website).  The GOP complains about the 35% corporate tax rate yet the average corporate rate was 18.5% for 2008-10.  Some corporation still had to pay 35%, some zero % and a few even got money back from the government.  This is because the tax code is filled with special breaks for companies and industries making for a very unlevel playing field in the world of business.

The rich want to keep this tax code in place since it is very beneficial for them, also for accountants (more work for them) and it continues the patronage system between the wealthy and politicians (you do a favor for me and I will take care of you later when you need a job, the revolving door between government and business).

For those of you who think the continued rise in inequality is not a problem for the US then please explain why the two times of high inequality in the past 100 years ended in economic disaster for the US.  (1929 - the Great Depression    2007 -the greatest recession since the Great Depression)   Both were times when Wall Street was more interested in leveraged speculative bets than capital allocation.  Just something to think about.
Jan 21, 2012 1:12PM
The true problem that no one wants to talk about is the two unpaid for wars for over 10 yrs ALL BORROWED money from the communist Chinese !And lets not forget the housing meltdown that has reduced the tax base of cities counties and states across this great nation and the wealth of Americans seeing that all our homes are only worth 30% of what they were ! And last but not least the 30 million jobs lost over the last 8 yrs ! Now Obama is the Pres but this mess was caused by the hysteria from 9/11 . Lets see 9/11 has cost America a lot ! About 6 trillion dollars all together , not counting the broken solders coming home with no arms , legs and so on . Add another 1.5 billion for the next 20-30 yrs taking care of these men and woman!!  Well the Japanese bombed Pearl Harbor and put the Pacific fleet at the bottom ! But yet today i cannot turn a corner without seeing a toyota or a honda! So much for America remembering that ? And lets not forget the gridlock in congress! So America none of these republicans are talking about that ! The true cause of Americas problems ! And the Republican congress wants to blame soc sec ? LOL OK ? Because America is stupid enough to believe it ... Sad to say !
Jan 20, 2012 9:15PM
These guys must be trying to to grab as much money as they can before the country goes  bankrupt.
Jan 22, 2012 3:38PM

How come, when the Democrats are in power the Republicans campaign on a balanced budget and term limits. When the Republicans in in power, or have enough members to stop most legislation they ignore the deficit and no mention of term limits. The Republicans are in favor of taxing middle and lower class Americans while cutting taxes for the top 1-2% of Americans. They are for getting rid of Social Security, and all taxes on investments, except income taxes on 401K's and IRA's, (If you have not figured it out, those 401K and IRA taxes are almost exclusively on the middle class) Republicans are for elimination of estate tax, except when a 401K or IRA is inherited. (Again, this is a tax almost exclusively on the middle class).

How can they get around 50% of the vote when they are trying to screw 95% of the electorate?

It proves the half of the adult population has below average intelligence.

Jan 23, 2012 12:04PM
Folks Romney,Newt,Boehner,McConnell,Cantor,Ryan are all lying to us. These folks were spending money like drunk sailors under Bush, which created this mess. Romney and Newt know for fact Taxes are going up know matter what some magic trick they play or say. In 2013 income taxes are going up it has to the numbers prove there is no other way to solve this mess. The question is are we going to allow the rich to keep their tax hole loops and not pay their share in ration to the middle and lower class. Can't figure out why no rich republican is taking Buffet up on his offer to match his money to theirs they pay the government.

Jan 23, 2012 1:17PM
If you ask me they all got a hole in the head. All any of these proposals will do is cut taxes for the 3%. What the US needs is a fair tax that closes or eliminates a lot of the exemptions/deductions that the 3% are using to increase their wealth. Regardless of what anyone of these wackos says, they are just saying what they think the people want to hear so they can get elected, then it's another 4 years of the rich getting richer. They have absolutely no concept of what 80% of the people in this nation go through on a day-to-day basis. Why is Wal-Mart getting so big and has revenues through the roof, because that's what the people can afford. We can't afford to go to nice stores because we don't have jobs here in America, and all they want to do is give more tax cuts to the wealthy and corporations. They haven't worked over the past 5 years, and they won't work in the future. Those who have the money, need to pay for it. Yes, the government does need to bring down spending. I'd think about 5% for all departments except for 10% for DOD. Then start putting tariffs on all goods brought in from other nations of about 25% with a cap on vehicles at $500. All these call centers that have agents in other nations should be tariffed also for about $2.00 per call. Perhaps they will think about bringing those positions back to the US then. Our nation has lost 670,000 high tech jobs like computer science over the past 10 years.(7 under Bush, 3 under Obama with the bulk being under Bush) Do we really want or need more of that? Things need to be fairer in our nation. The wealth of the 35 has grown over the past 3 years while everyone else has declined. Our leaders in Congress are bought and paid for by corporations and this starts at the top right here with super-pacs and their spending $1 billion towards the Presidential election. Perhaps now is a good time to clean house completely and put some people in Washington who know what it is to be a member of the 80%. The question is how does a person that isn't a member of the 3% get there?
Jan 23, 2012 1:14PM
Taxes mean nothing. Over spending in Government is the problem.  Politicians reap their fortunes manipulating taxes. Anyone who thinks that "business taxes" make sense at all is delusionary. ALL BUSINESS TAXES are paid by the consumers just like any sales tax. Taxes are part of the COST in business and are passed through in prices. Business taxes hurt the poorest the most, by their inflationary nature.  Politicians should face strict term limits and should be prohibited from "consulting" (i.e. lobbying) on Government matters for a lifetime. (Note that all in the Congress become millionaires in short times.)
Jan 23, 2012 12:20PM
Tax all income the same, no matter where it comes from.
Jan 23, 2012 1:29PM
It is sad to see that even many of the poor and deprived in this country toe the line of all these GOP candidates. What the current crop of GOP candidates are doing is hating Obama, because of his color. When Gingrich says that Obama is the 'food stamp President', it is a blatantly false statement. The general impression that is provided is also that Blacks have been benefiting by way of food stamps. Not true either. Whites have been equally helped by the program. Gingrich has made millions, providing strategic advise to Freddie Mac, while criticizing it for providing loans to the poor. He took 6 million dollars in fees!! 
Romney has no spine in admitting that he did NOT keep his money in the US and did not pay any taxes for a number of years! He has no spine to admit that his Health care law helped everybody!!
All that GOP wants is tax cuts for the rich or send our troops into war! Bush and Cheney with Rumsfeld and Wolfowitz are responsible for more than 4500 deaths of US and over 30,000 injured and maimed in Iraq and Afghanistan! And never even got close to Osama, who was killed under the current President. The war in Iraq was never paid for and unnecessary. 
How can our country work without revenues coming in? It is like the household income.. nobody can survive without an income! Ever since Reagan turned this country in 3 years from the largest creditor to the largest debtor country, we have been in trouble, with those trickle-down economic policies. During that era, the richest 1% controlled about 7-9 trillion dollars of this country's wealth. Currently, the same bunch controls about 40-45 trillion! 

It is time that the common person wakes up and realizes that we are being taken for a ride by these idiotic GOP, who are for the rich, by the rich and of the rich!
Jan 23, 2012 12:12PM
Why would anybody in their right mind trust or believe anything that Newt has to say. Essentially kicked out of congress, numerous ethics violations, can't even keep faith with his own wife(wives). Romney is the lessor know. STrike one has been his religion, although it really shouldn't matter, strike two his wealth. Strike three..any number of things. Both of them want the rich to be off the hook on taxes. Neither will do anything to bring back jobs from overseas. Both basically would do away with social security,medicare/medicad and virtually anything that the poor and middle class depend on to survive. In the meantime Newtie is at Tiffanyis' charging up more than alot of people make in several years for jewelery for whatever slut of the week he sets his eyes on. Romney can't cruise around the country in stretch limos', private jets, and 500,000 RV's to spread his campaign message. Frankly the democratic choice (ha ha) or lack of any choice is no better. Its' gonna be rough for the next four years. Lets' hope there are some real worthwhile candidates 2016. But I won't hold my breath.
Jan 23, 2012 2:07PM

Congress votes on the tax laws and the president signs it into law.  Reagan signed tax laws that helped the rich.  Sorry to criticize the patron saint of the GOP.


Must have missed where Grateful_American said Obama was a victim of color.  Nice cheap shot with the avoid studying line.  He voted to invade Iraq.  Just like almost everyone else when they were told Iraq had WMD's.  If would be interesting to know how Congress would have voted if they weren't lied to.


There wasn't any mention of Freddie and Fannie taking Gingrich's advise.  They paid him, whether they took the advise or not.  That is the fact.

Jan 23, 2012 6:12PM
oldoldmike accuses Grateful_American of distorting facts and he seems to be just doing that himself! What advise Mr. Gingrich provided to Fannie and Freddie has never been disclosed! And at a whopping 6 million dollars??? Gimme  a break! I could have given them sane advise for much less --FREE! So many economists were saying that about the housing market for a long long time.. Only Greenspan and Freddie and Fannie did not hear them.. It took 6 million to Newt to perhaps stop some sort of prosecution against the executives!

Reagan gave us trickle down economics -- Please verify - it is in black and white -- this country did go from the largest creditor to the largest debtor in 3 years, under Reagan!
Bush sent us into war -- Afghanistan and then Iraq.. the 2nd war was not justified at all.. And how many terrorists did he kill may I ask?? Thousands of Iraqis have been killed.. perhaps hundreds of thousands.. and yet I see people supporting Bush's and Reagan's views.. 

I think that oldoldmike himself has views that are not in keeping with the normal, sane people of this beautiful country!
Jan 23, 2012 3:02PM
Both parties acknowledge that America is suffering through a very serious crisis; almost as serious as the real threat of domination during WWII.

So what did we do as Americans to meet the crisis back then?  We didn't borrow money from China, that's for sure.  We assessed ourselves higher taxes to pay for bullets and bombs with the top tax rate in 1944 set at 94%.  We also borrowed from ourselves with nine war bond drives.

When Korea came along, Eisenhower asked for and got a top tax rate of 92% to pay for the conflict that would keep Maoist China from dominating that entire region.

So what do we do today?  Engage in a lunatic bidding war to see who can come up with the lowest tax rate proposal  Paul won with his suggestion that our tax rate be zero for everyone.  Very adult.

Jan 23, 2012 2:51PM
No one cares if you are rich or no one even cares how you got rich we only care if you pay your taxes that is all, tax cut for the rich are an entitlment  for the rich think about it please.
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