The top 0.1 per cent of US taxpayers would save an average of $1.4 million in taxes under the economic plan of Republican presidential candidate Tim Pawlenty, according to an independent analysis.
Pawlenty’s $11.6 trillion tax-cut plan, which reduces rates on income, capital gains, interest, estates and dividends, is almost three times larger than the proposals endorsed by House Republicans.
Compared with the current tax policy, 63.6 per cent of US households would receive a tax cut, with most of the remainder experiencing no change. Almost half of the benefits would flow to taxpayers in the top one per cent of income distribution, or those earning more than $593,011 in 2013.
“It’s heavily weighted toward benefits for the wealthy, giving them big tax cuts. It makes the tax system much less progressive,” said Roberton Williams, a senior fellow at the Tax Policy Center in Washington, which conducted the analysis and released it today. The center is a joint venture of the Urban Institute and the Brookings Institution.
In a June 7 speech, Pawlenty called for cutting the top individual tax rate to 25 per cent from 35 per cent and reducing the top corporate rate to 15 per cent from 25 per cent. He proposed eliminating taxes on capital gains, dividends, interest and estates and allowing “small businesses” that currently pay taxes at individual rates to pay at the corporate rate.
Cuts for ‘everybody’
“We reduce taxes for everybody,” Pawlenty spokesman Alex Conant said today in response to the distributional analysis. “The goal here is to create jobs and grow the economy, and to do that, we needed to reduce taxes on people who were entrepreneurs, small business owners.”
Pawlenty’s plan would eliminate corporate tax breaks and retain all individual tax breaks. Pawlenty would expand the 10 per cent income tax bracket to cover the first $50,000 of income for individuals and the first $100,000 for married couples.
Compared with fully extending all the tax cuts enacted under President George W Bush, Pawlenty’s plan would cost the government $7.6 trillion in revenue over the next decade, according to the study. Compared with current law, under which the tax cuts will expire at the end of 2012, Pawlenty’s plan would cost the Treasury $11.6 trillion in foregone revenue, the study found. The campaign estimates the revenue loss at $2 trillion amid the five per cent annual economic growth Pawlenty is seeking.