Newt Gingrich’s proposed tax plan would cut federal revenue by nearly $1.3 trillion, or 35%, according to an analysis by the nonpartisan Tax Policy Center.
Much like Texas Gov. Rick Perry’s plan, Gingrich proposes to let taxpayers choose if they want to calculate their tax using the current code, or a flat 15% rate. (Perry’s plan gave the option of a 20% flat rate.)
Because the plan allows taxpayers to choose how they want to calculate what they owe, nobody would be worse off. But, as was the case with Perry’s plan, the idea that taxpayers would have to calculate their liability twice might turn some people off.
The plan would do away with the Alternative Minimum Tax and most deductions and credits, but would keep deductions for mortgage interest and charitable gifts and the earned income, child and foreign tax credits. Capital gains, dividends and interest income would not be taxed.
The plan would cut the corporate tax rate from 35% to 12.5% and would allow corporations to write off capital expenditures.
By 2015, according to the Tax Policy Center’s Howard Gleckman, 70% of all households would get a tax cut under Gingrich’s plan, compared to what they would pay if today’s rules still applied, but the top 0.1 percent would reap the lion’s share of the benefits, saving an average of $1.9 million. The tax cut for low-income households would average about $63.
But such a deep tax cut comes with a hefty price tag: Gingrich’s plan would add about $850 billion to the federal deficit in 2015. By comparison, Perry’s plan would add $570 billion to the deficit.
“A plan such as this seems tailor-made for anti-tax Republican primary voters,” Gleckman wrote in a blog post explaining the analysis. “But if Gingrich wins the nomination, he may not have such an easy sell to independents, who may wonder why adding $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.”