Republican views on taxes include the belief that tax reduction is important, but must be done the right way. The party believes that budget surpluses have caused Americans to be overtaxed-a condition that is not only threatening their financial prosperity, but is also hindering (and possibly even reversing) growth to the country’s economy. They also want to limit the top marginal rate, believing it punishes those who have worked hard and invested well. Republicans also wish to make the Research and Development tax credit permanent. These three tax reforms combined, Republicans believe, will encourage and promote entrepreneurship. They also believe in encouraging saving and investments by implementing a tax credit for investments. However, despite their support for lowering taxes, Republicans do believe that tax cuts or tax incentives without any balancing spending cuts are detrimental to the economy.
The 2012 platform states that Republicans “reject the use of taxation to redistribute income, fund unnecessary or ineffective programs, or foster the crony capitalism that corrupts both politicians and corporations.” They support making taxes “simple, transparent, flatter, and fair.” They dislike the convoluted nature of the current tax code, and the fact that it is nearly impossible for the average American to understand it. Republicans oppose retroactive taxation in all cases, as well as taxes that set the classes against one another, and divide Americans. They do not support the taxation of religious organizations, charities, and fraternal benevolent societies, and also believe that contributions to these organizations should be tax deductible.
Republican Tax Cuts
Overall, Republicans support a variety of tax cuts. They wish to increase the child tax credit, a credit that reduces your federal income tax per child that qualifies. They also wish to get rid of the marriage penalty, which is the term for when a couple pays more filing jointly as a married couple than they would have filing separately. Republicans want a full repeal of the death tax (also known as the federal estate tax, under which a tax is applied to the transfer of the deceased’s estate at the time of their death). The death tax takes a particular toll on family businesses or farms, where it is common that the family has to sell the business or farm to pay for the tax. In this situation, the employees and customers suffer as well, supporting the theory that overtaxing can harm American’s financial prosperity, as well as the growth of the economy. The Republican Party supports the housing industry’s efforts to make home owning easier, without setting quotas and giving preferential treatment. This is because they believe that lower taxes and lower interest rates could allow more Americans to be homeowners, which is in the national interest. They also believe in providing deductions on premiums of long-term insurance plans, with additional exemptions for elderly spouses, parents, or relatives that a family tends to in their own residence.
The Republican plans to reduce taxes were reflected in the Bush tax cuts. In addition to the measures listed above, these include having four lower tax brackets, providing tax cuts for all, but focusing them on the lower classes, and promoting charitable giving and education.
Recent Tax Reform Plans
This past February, Republicans proposed a tax reform, which included many of the party’s ideals, as well as some ideas that have been suggested by the current administration. The writers of the plan say part of the primary goal was to simplify the tax code. It included just three income tax brackets, 10 percent, 20 percent, and 35 percent, which would reduce income tax rates overall. The plan would also made up for any revenue losses from decreased income taxes with additional taxes and fees for investment managers, big banks, and the highest earners. The plan called for a raise in the child tax credit, while cutting back other deductions and credits. This would greatly simplify the filing process, as 95 percent of filers would take a standard deduction over itemizing. While the plan has ideas from both parties, and would greatly simplify the overall process, the tax system has not been overhauled since 1986, and those in charge of the proposal see little hope for it being implemented this year. The reception of the bill has been mixed, with some seeing possibilities in it, and others dismissing it entirely. Chuck Schumer called it “dead on arrival,” due to its elimination of deductions for state and local taxes. However, a white house spokesperson that commented on the bill expressed optimism. Many Democrats are attacking the bill because of the cuts it makes to tax breaks they support, and this will be the primary opposition that it faces.
However, while few expect these negotiations to have any immediate impact, House Speaker John Boehner called this proposal “the beginning of a conversation” that needs to be had about tax reform, so it is not out of the question that the proposal will lead somewhere in the future. Some lawmakers say this could be as late as 2017, but it is clear that this proposal will be the first Republican marker for reform when the time comes.
The Bush Tax Cuts
One of the best-known standing Republican tax reforms was the Bush Tax Cuts, which have been extended through Obama’s presidency. There are four major parts to these tax cuts. Together, the laws that keep these cuts in effect today are: The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, which lowered tax rates and simplified retirement plans), The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA, which accelerated changes in EGTRRA, increased the exemption amount for the Alternative Minimum Tax, and lowered taxes on dividends and capital gains), The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (which extended the cuts in EGTRRA and JGTRRA, as well as extending the American Recovery and Reinvestment act of 2009), and the American Taxpayer Relief Act of 2012 (which keeps the Bush Tax Cuts in effect for the middle and lower classes, but allows the expiration of the cuts for the upper classes). The cuts were originally set to expire in 2010, but were extended for 2 years by President Obama. In 2012, the tax cuts were made permanent during the fiscal cliff. The actual impact of these cuts on the economy is in dispute, with some sources claiming that they led to the rich shouldering more of a financial burden, with others claiming that the cuts benefitted the rich far more than the lower or middle classes. President Bush and his associates claimed that the cuts essentially paid for themselves, but these claims have been disputed by the U.S. Treasury Department, the CBPP, and the CBO. Some economists believe the cuts helped spur economic growth, while others claim that they increased the budget deficit and harmed the economy. However, it is more or less universally accepted that the middle class benefited from these cuts, which is why they were extended in 2010, and most of them made permanent in the American Taxpayer Relief Act of 2012.
In Take Back America by Dick Morris, the author points out that the Bush Tax Cuts, while cutting taxes for the wealthiest Americans, as well as the lower classes, increased tax revenue from the wealthiest Americans. In 2001, the 1% of wealthiest Americans paid $301 billion a year in taxes, or 65 percent of the total taxes. In 2006, after the tax cuts, the same 1% paid $408 billion a year, or 71 percent of the total taxes. This strongly supports the Republican view that lower taxes increase revenues in all cases, and that raising taxes is not the answer.
Democrats Vs Republicans on Taxes
While Republicans believe in balancing spending cuts with tax cuts across the board, Democrats believe in cutting taxes for the middle and lower class, while raising them for the upper class. They believe in a higher marginal rate, with income tax being higher for those who make more, as opposed to the Republican views that taxes should be equal percentages for all income levels. In the 2012 Party Platform, 56% of republicans opposed raising taxes on those who earned over $250,000. This isn’t to say that Republicans do not believe in focusing relief on the middle and lower classes; they do, however, believe in relief for all Americans, and not in raising taxes on the upper classes.
This past July, Obama proposed tax reforms that were rejected by Republicans. The president accused republicans of rejecting the proposal simply because it was made by him, but those who dislike the proposed reforms have given the reasons for their sentiments. Senator Mitch McConnell from Kentucky said that he disapproved of the proposed reforms because “It’s just a further-left version of a widely panned plan he already proposed two years ago — this time, with extra goodies for tax-and-spend liberals. The tax hike it includes is going to dampen any boost businesses might otherwise get to help our economy.” A House Republican leadership aide stated that the planned cuts to corporate taxes coupled with leaving the top individual tax rate where it is, as proposed by President Obama, “would have a devastating effect on small businesses in America.”
Mitt Romney on Taxes
Mitt Romney is in full support of the Bush Tax Cuts, and believes that they helped get the economy back on track when it was going through a tough time. He supports tax cuts to middle class groups, especially in times of economic hardship. He believes that “Lowering taxes helps build jobs & helps working families, and so I strongly have been of the view that one of the great lessons for Ronald Reagan was that lowering taxes helped build our economy.” This includes cutting taxes on interest, dividends, and capital gain, which increases the money that the middle class pockets, and therefore increases the money being put into the market. Romney, like most republicans, sees the death tax as nonsensical, and fully supports cutting it. He stated, “It doesn’t make sense to me that people get taxed when they can earn their money, get taxed when they save their money, and get taxed when they die. We should get rid of the death tax.”
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