Newt Gingrich joked that he ought to rename his proposed 15 percent flat tax the “Mitt Romney Flat Tax,” so “all Americans would pay the rate Mitt Romney paid.” Actually, not all Americans. Under Gingrich’s tax plan, Romney would likely pay closer to zero percent.
Although he has not released his tax records, Romney this week revealed an approximation of his effective tax rate:
Romney, Jan. 17: “What’s the effective rate I’ve been paying? It’s probably closer to the 15 percent rate than anything. Because my last 10 years, I’ve … my income comes overwhelmingly from investments made in the past, rather than ordinary income or rather than earned annual. I got a little bit of income from my book, but I gave that all away. And then I get speaker’s fees from time to time, but not very much.”
Gingrich quickly turned the announcement into a talking point.
Gingrich, Jan. 17: “I think we ought to rename our flat tax, we have a 15 percent flat tax, so this would be the ‘Mitt Romney flat tax.’ All Americans would pay the rate Mitt Romney paid. I think it’s terrific.”
Under the Gingrich tax plan, individuals could continue under the current tax policy or elect to pay a 15 percent flat tax. Gingrich would keep deductions on charitable giving and home ownership, and create a new personal deduction of $12,000 for everyone.
But here’s the part that would greatly enhance Romney’s bottom line: Under Gingrich’s plan, capital gains, dividends and interest income would not be taxable. Based on Romney’s financial disclosure form and what Romney said this week, that’s most of his income. In other words, his effective tax rate might be closer to zero. It wouldn’t actually be zero, though, because he’d still have to pay 15 percent on the (“not very much”) $374,000 he made in speaker fees.
Under Romney’s plan, taxes on long-term capital gains, dividends and interest income would only be eliminated for people making under $100,000 (or married couples filing jointly with income under $200,000). So Romney wouldn’t see any relief under his own plan.
“Under Gingrich’s plan, [Romney] would pay a lot less,” said Eric Toder of the nonpartisan Tax Policy Center, which has analyzed the tax plans of both candidates.
“It’s odd for Gingrich to make this populist argument given the rate Romney would be paying [under Gingrich’s tax plan]” Toder said. “He’s nicer to Mitt than Mitt is.”
But Romney would still do better under his own tax plan than the one proposed by President Barack Obama. That’s because under the new health care law, which Romney vows to repeal, there’s an additional 3.8 percent tax on investment income for high-income people, starting in 2013.
Gingrich has not released his tax statements either, though he said he paid 31 percent of his income in taxes for 2010. By comparison, Obama paid $453,770 in taxes in 2010, from a total income of nearly $1.8 million, for an effective tax rate of 25 percent, according to tax records released by the president. The so-called “Buffett rule” proposed by Obama would set a minimum tax rate for millionaires, so that they cannot pay a lower effective tax rate than middle-income taxpayers.
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