Well, if the Republicans insist on treating Newt Gingrich as a legitimate candidate for president, I guess we should take a look at the details of his economic and tax-reform plan.
Not surprisingly, the core of his proposal is a series of tax cuts. It also should not shock you to learn that every change that Gingrich proposes would overwhelmingly benefit those Americans who are already at the very top of the economic scale.
For example, Gingrich proposes to:
– Eliminate the capital gains tax. This year, the richest 1 percent — those with incomes of $532,000 and above — would reap 89.3 percent of that tax savings. The bottom 80 percent — those making $103,00 and less — would share 2.2 percent of the bounty.
– “Dramatically” reduce the corporate income tax to 12.5 percent. This year, those households making more than $500,000 — a little more than 1 percent of all taxpayers — would reap 59 percent of the benefit of that change. Those households making $1 million or more would collect 48.7 percent of the benefits. Gingrich would also allow “for 100 percent expensing of new equipment to spur innovation and American manufacturing,” which would cut corporate taxes still further.
– Eliminate the estate tax, or as Gingrich relabels it, the death tax. Since the tax is imposed only on those estates valued at $5 million or more, 100 percent of the benefits of eliminating the tax would go to the recipients of those very large estates.
— “Move toward an optional flat tax of 15 percent …. This optional flat tax system will preserve deductions on charitable giving and home ownership, and create a new personal deduction of $12,000 for every American.” Again, the benefits of that change would accrue almost exclusively among the richest of Americans, because the only group that currently pays an average effective income tax rate of greater than 15 percent are the top 5 percent of taxpayers.
For example, the top 1 percent pay an average effective rate of 21.5 percent. The top 0.1 percent — those with incomes of $2.18 million or more — pay an average effective rate of 22.5 percent. A flat tax of 15 percent would cut income taxes for those Americans by a third.
I have not seen projections of what kind of revenue the Gingrich plan would produce, but given the size of the tax cuts involved, it would be considerably less than the current system produces. Given that Gingrich also proposes to balance the budget, those revenue numbers would be very interesting to say the least. Financing tax cuts on the scale that he proposes while also balancing the budget would require massive reductions in programs such as Social Security and Medicare.
– Jay Bookman