Photo: Gage Skidmore via Wikimedia Commons
As the 2012 presidential election approaches, candidates have been working overtime to make the greatest impression on the American public. They know one of the big issues on the minds of Americans is taxes, which is why a large number of tax proposals have recently surfaced.
Let’s take a closer look what they are and who is backing them.
2012 Presidential Election Candidate Tax Plans Gaining Attention
There have been a number of tax plans proposed in recent months as candidates gear up for the elections next year. Those that have gained the most attention come from Republican candidates Herman Cain, Rick Perry and Mitt Romney, as well as President Barack Obama. So what exactly are they proposing?
1. Herman Cain: The 9-9-9 and Fair Tax Plans
Republican presidential candidate and former chairman and CEO of Godfather’s Pizza, Herman Cain, has made the greatest splash among campaigners within his party to date. According to CBS News/New York Times polls conducted on GOP presidential candidates on Oct. 25, Cain had earned 25 percent support from Republican primary voters.
One reason for his enormous support is his push for new tax plans. Here’s a quick look at his proposals:
- 9-9-9: The proposal would introduce a 9 percent business flat tax for gross income, a 9 percent individual flat tax for everyone, regardless of income bracket, and a 9 percent national sales tax in addition to state taxes, but would replace taxes already embedded in selling prices. Cain says the proposal would remove all payroll taxes and unite all taxpayers while lifting a $430 billion burden from the country.
- Fair Tax: After receiving negative feedback on the 9-9-9 proposal, Cain has decided to back an already-existing proposal known as the Fair Tax. This plan, created by a wealthy Houston builder named Leo Linbeck, Jr., would impose a 30 percent federal retail sales tax that replaces the personal and corporate income taxes, as well as gift, estate, payroll and capital gains tax rates.
Cain seems to favor the Fair Tax over his own 9-9-9 proposal, which follows the sentiments of most middle- and lower-income Americans who would suffer from the 9 percent national sales tax, while rich Americans benefited greatly from the 9 percent income tax.
2. Rick Perry: Flat Tax Proposal
Shortly after Herman Cain introduced his 9-9-9 proposal, Republican candidate Rick Perry introduced his own solution to America’s tax woes: A flat tax.
Perry explains the flat tax would simplify the country’s complicated tax code. Key components of the flat tax include:
- One tax rate: The flat tax would replace income tax by creating one flat-tax system. In other words, all people, regardless of income, would pay the same tax rate.
- Tax-free return on savings: Interest, capital gains and dividends would be tax-free. The taxes would only be paid when the money is initially earned, withdrawn after being deposited or invested.
The flat tax would also offer an exemption to taxpayers based on family size. This would take the place of today’s standard deduction.
3. Mitt Romney’s Tax Proposal
Mitt Romney’s tax proposal doesn’t seem to have a name just yet, but has received a good amount of attention. So far, his proposal most closely resembles the nation’s current tax code. Here are the basics:
- Individual tax adjustments: Romney wants to reduce taxes on savings and investment accounts, as well as eliminate the death tax and capital gains taxes for those earning less than $200,000.
- Corporate tax adjustments: On the corporate level, he would like to lower the top rate on the income tax from 35 percent to 25 percent. He would also like to transition to a “territorial” tax system.
In time, Romney wants to pursue what he calls a flatter, fairer, simpler tax structure, but for now wants to maintain marginal individual tax rates (the percentage paid on the last dollar a person earns) at their current levels.
4. Obama’s Tax Plan
Of all of the 2012 presidential candidates, we’ve heard the most of Obama’s tax plan, mostly because he’s made it clear that he plans to issue higher tax rates for wealthy individuals. His plan has also gained attention due to Warren Buffett’s controversial support.
In 2010, he extended Bush tax cuts, which meant all taxpayers would continue to pay rates that were, on average, 5 percent lower than standard rates set. However, his plan is to allow the Bush tax cuts to expire for the wealthy while permanently lowering them for middle- and lower-income taxpayers.
Obama’s jobs plan, which was recently struck down in the Senate, promoted a number of tax adjustments, including a 2-percent break on individual payroll taxes. It also waived all payroll taxes for businesses that hire new workers or give current workers a raise.
Since then, lawmakers have attempted their own proposals based on parts of Obama’s jobs bill, but have yet to come to a consensus on how taxes should be handled, thus halting their efforts to pass a jobs bill.
Are Any of the Tax Plans Winners?
As with most political issues that surface around election time, there doesn’t seem to be a consensus on which proposal is best for the American public.
Herman Cain
The Herman Cain 9-9-9 tax seems to have received the most criticism for creating an imbalance in the amount of taxes lower-income individuals will pay in comparison to wealthy taxpayers. The 9 percent sales tax would like hit middle- and lower-income taxpayers hard, further widening the gap between the wealthy and everyone else.
On the other hand, some say Cain’s Fair Tax is a bit more reasonable. In fact, Bloomberg BusinessWeek recently noted the plan he supports has some credibility and has garnered support in conservative economic circles, mainly because it shifts the tax burden away from individuals’ incomes. Many worry, though, that the majority of the tax burden will still fall on the poor.
Rick Perry
Opponents of Perry’s flat tax say low-income taxpayers could end up paying a high rate–It is speculated the tax will have to be high to create enough revenue to compensate for the tax breaks it might allow. Recently, the Obama administration released a memorandum that attacked Perry’s tax, saying that it would only benefit the wealthy “who generate much of their income from investments, rather than work, to see huge gains.”
Perry’s camp argues that low-income individuals could benefit from the family-size exemption since it serves as a deduction, but some say that keeping the Earned Income Tax Credit might be necessary to create a fair balance.
Mitt Romney
There haven’t been many arguments against Romney’s tax plan, possibly because it most closely resembles the one in place. However, the issue of lowering corporate taxes is one that could come up for debate, as well as the idea of implementing a flat tax at a later date.
President Obama
As for Obama’s plan, there have been fierce debates over his proposal to raise taxes on the wealthy while lowering them for everyone else. Since his jobs bill was shot down in Congress, it will be interesting to see what plan will emerge from his camp in the coming weeks.
There’s no doubt changes need to be made to fuel the economy. With taxes playing a huge role in operating government programs, keeping schools running and more, let’s hope that the ultimate plan will not only help the government but spare taxpayers’ bank accounts.
