Talk of Taxes and Economic Growth Rose above Fray at Florida Debate
by AccountingWEB on
By Deanna C. White
On January 23, the four remaining contenders in the race for the GOP presidential nomination hit the ground running in Tampa, Florida. The blistering debate was dominated by frontrunners Mitt Romney and Newt Gingrich, who traded barbs over issues of character and electability.
The night featured a series of increasingly antagonistic attacks between Romney, who attempted to label Gingrich an "influence peddler" for the work he did after leaving Congress, followed by vehement denials from Gingrich, who accused Romney of "walking around this state essentially saying things that aren't true."
But, despite the fireworks, overtones of core campaign issues like tax reform, deregulation, and economic growth were still apparent in the undercurrent of the debate. While all candidates issued blanket statements about the importance of lowering taxes and the critical need for tax reform, it was a question about former Massachusetts Governor Mitt Romney's personal tax returns that prompted a robust discussion about parity and the American tax code.
When NBC News moderator Brian Williams asked Romney whether there would be anything "surprising" or "controversial" in the tax returns he planned to release on January 24, Romney defended his compliance with disclosure, then parlayed the question away from his personal tax returns to a discussion of overall tax equity.
"No surprises Brian. The most extensive disclosure that I made was the financial disclosure requirements under the law. I laid out what my assets are and where they are, and people have been looking at that. It's very similar to what it was four years ago," Romney said.
"The real question isn't so much my taxes, but the taxes of the American people," Romney continued. "The real question people are going to ask is who's going to help the American people at a time when folks are having real tough times?"
Romney said his tax plan is designed to alleviate those "tough times" by eliminating the tax on savings for middle-income Americans, and eliminating the tax on interest, dividends, and capital gains for anyone making under $200,000 a year.
Romney said he would lower the corporate tax rate to 25 percent as "quickly as possible" and then "begin a process of reshaping the entire tax code." He then added, "It's far too complex, it's far too intrusive, it's far too great."
Romney also said he would prefer to lower the tax rates and broaden the tax base in accordance with a model similar to the Bowles-Simpson plan, which he believes represents a pro-growth tax policy.
In response, Gingrich applauded Romney's decision to release his tax returns, saying it was the "right thing to do," but he wasted no time raising the controversial issue of Romney's marginal tax rate.
"I think you indicated the other day that you pay something like a 15 percent marginal rate. My position isn't to attack him for paying a 15 percent marginal rate," Gingrich said. "In my tax proposal I have an alternative flat tax [based on] the Hong Kong model, where you get to choose what you want, and our rate's 15 percent. So I'm prepared to describe my 15 percent flat tax as the Mitt Romney flat tax. I'd like to bring everybody else down to Mitt's rate, not try to bring him up to some other rate."
On January 24, documents provided by the Romney campaign revealed Romney earned more than $42 million over the last two years and paid $6.2 million in taxes, for an effective tax rate averaging 14 percent.
According to his 2010 return, Romney paid about $3 million in taxes, for an effective tax rate of 13.9 percent. For 2011, Romney estimates that he will pay about $3.2 million, for an effective rate of 15.4 percent.
The tax rate that Romney paid both in 2010 and 2011 is lower than what most average Americans are required to pay, because the majority of Romney's earnings come from profits, dividends, or interest from investments, rather than a salary. That distinction allows him to pay a lower tax rate under the current tax code.
Pundits have long argued that disclosure of Romney's tax rate and the perception that he is a member of the "wealthy one percent" of Americans, could alienate him from middle-income American voters.
Aside from his jab at Romney, Gingrich also defended the Bush-era tax cuts and touted his deregulation platform.
When Williams asked Gingrich why the Bush-era tax cuts "didn't create jobs," Gingrich said he felt the cuts actually worked in the sense that they prevented the American economy from falling into an even deeper economic slump in the wake of the 9/11 attacks.
"I think most economists agree that in [2002 to 2004], we'd have been in much worse shape without the Bush tax cuts," Gingrich said. "But you also have to look at the regulatory burden."
Gingrich said the reason he has consistently called for repealing regulatory legislation like Dodd-Frank, Obamacare, and Sarbanes-Oxley is to strip away the "huge layers of paperwork, government intervention, and bureaucratic micromanagement" that are crippling the American economy.
Former Pennsylvania Senator Rick Santorum's biggest challenge seemed to be simply interjecting into the conversation above the Romney-Gingrich fray. At one point, he pointedly reminded voters that despite the media fracas created by the frontrunners, the GOP nomination isn't a "two-person race."
"I think if you've learned anything about this election, [it's] that any type of prediction is going to be wrong," Santorum said. "The idea that this has been a two-person race has been an idea that has been in fashion for about eight months now, and it's been wrong about eight times."
Santorum argued he is the candidate best qualified to wear the mantle of "true conservatism." He took a firm stance on two financial issues: the Wall Street bailout and the mortgage crisis.
Santorum said Romney and Gingrich's support of the Wall Street bailout calls into question their commitment to capitalism. He also argued homeowners should be allowed to deduct any losses on the sale of their homes because of the current mortgage crisis.
"[In my tax plan], I talk about five areas where I allow deductions – one of them would be [to allow people to deduct losses from the sale of their homes]," Santorum said. "Right now, you can't do that. You have to pay gains, depending on the amount, but you can't deduct the losses."
It's critical, Santorum said, to allow these deductions on a temporary basis to allow people to "get out from underneath these houses that they're holding on to."