After a flurry of attack ads in the past two weeks, President Barack Obama this week released a TV ad in which he spoke directly into the camera and discussed how his policy approaches differed from Mitt Romney’s. He cited taxes as one area where they had different philosophies. Obama said, "Gov. Romney's plan would cut taxes for the folks at the very top."
We’ll check whether this is an accurate characterization of Romney’s plan.
Romney has posted some key elements of his tax plan on his campaign website. Here’s a summary of the provisions for individual taxpayers:
• Cut marginal rates by one-fifth on a permanent, across-the-board basis
• Eliminate interest, dividend, and capital gains taxes for taxpayers with an adjusted gross income below $200,000
• Eliminate the estate tax
• Repeal the Alternative Minimum Tax
To analyze the Romney tax cut, we turned to the Urban Institute-Brookings Institution Tax Policy Center, an independent think tank that evaluates the tax proposals submitted by presidential candidates. The Tax Policy Center looked at two versions of Romney’s tax proposal. We will use the analysis of the more recent of Romney’s two plans, which the group published in March 2012.
The Tax Policy Center ran two sets of numbers, one that gives Romney credit for extending the tax cuts enacted under President George W. Bush and for an annual adjustment in the Alternative Minimum Tax and one that doesn't.
Under the analysis that gives Romney credit for extending the Bush tax cuts and the AMT, people in each of the 11 income ranges in the center’s study saw a tax cut, with after-tax income increasing by anywhere from 0.3 percent for people who earn less than $10,000 to 19.8 percent for people earning more than $1 million per year.
Under the other measurement, which we find is more appropriate, people in eight of the 11 income ranges got cuts -- all except the income ranges below $30,000. For those earning more than that, after-tax income would increase by anywhere from 0.8 percent for those in the $30,000 to $40,000 range to nearly 12 percent for those earning more than $1 million.
So Obama is telling part of the story. Yes, there are substantial benefits for people at the top, but he ignores that most people in the middle and lower reaches of the income ladder would benefit as well. Using the calculation that does not give him credit for the Bush and AMT extensions, people earning from $40,000 to $50,000 would see a cut of $512 on average, while taxpayers in the $50,000-to-$75,000 range would see a cut of $1,122.
Still, there is support for Obama's point because the Romney tax cuts are tilted toward the wealthy. The biggest winners under Romney’s tax plan are those earning more than $1 million. That group accounts for less than 1 percent of all taxpayers, but would receive 26 to 31 percent of the Romney plan’s tax benefits, according to the Tax Policy Center's calculations.
Obama is correct that Romney’s plan does indeed cut taxes for high-income Americans -- quite heavily in fact -- but the rich aren’t the only ones who would see a cut. Taxes would be reduced in lower income ranges, too. Still, the plan gives a large share of the benefits to higher income taxpayers. On balance, we rate the claim Mostly True.