By Deanna C. White
On December 30, the Friday before the Iowa caucus, Republican presidential candidates continued to shift positions in polls among Iowa voters with as much fluidity as beads on an abacus.
While some candidates' positions on tax reform, most notably former candidate Herman Cain's 9-9-9 flat tax plan and Rick Perry's massive tax cuts, have spurred discussion and controversy throughout the Republican race, Mitt Romney's tax reform platform – "Believe in America" – has drawn relatively little discussion.
That's perhaps, some CPA analysts argue, because the former Massachusetts governor's individual tax reform portion of the proposal "plays it so close to the vest."
Romney's tax policy for individuals
- Lower the corporate income tax rate to 25 percent
- Transition to a "territorial" tax system that would encourage companies to bring their foreign profits home to invest in the United States
Brian Greenberg, CPA, owner and CEO of Brian C. Greenberg & Associates in Marlton, New Jersey told AccountingWEB, "I think the disappointment with Romney is that he's staying status quo on the personal side of the tax equation. He's not offering any significant changes like some of the other candidates' flat tax programs. He's basically saying just continue with the Bush tax rates and continue to work within the same flawed system. That's why he's not exciting the Republican base."
- Maintain marginal rates at current levels
- Further reduce taxes on savings and investment
- Eliminate the death tax
- Pursue a long-term goal of a "flatter, fairer, and simpler" tax structure
On the corporate side, Romney would lower the corporate income tax rate to a more internationally competitive 25 percent, down from the current top rate of 35 percent. He would also transition away from the current "worldwide" tax system, which he says encourages "American multinational companies to park their profits permanently overseas," and adopt a territorial tax system.
Romney states in his plan, "The best course in the near term is to overhaul and dramatically simplify the current tax code, eliminate taxes on savings for the middle class, and recognize that because we tax investment at both the corporate and individual level, we should align our combined rates with those of competing nations. Lower taxes and a simpler tax code will help families and create jobs."
At the individual level, Romney acknowledges the current tax structure is a dysfunctional "Rube Goldberg contraption of bewildering complexity" in need of a "fundamental overhaul," but he suggests relatively conservative immediate reforms in comparison to some of his fellow candidates' plans.
Specifically, Romney would maintain the low marginal tax rates established under the Bush administration and make permanent the lower tax rates for investment income put in place by President Bush. He would establish a "Middle-Class Tax Savings Plan that would enable most Americans to save more for retirement," and he "would seek to eliminate taxation on capital gains, dividends, and interest for any taxpayer with an adjusted gross income under $200,000."
Those measures "would encourage more Americans to save and to invest for the long-term, which would in turn free up capital for investment flowing back into the economy and helping to facilitate economic growth," Romney argues.
Romney also would eliminate the federal estate tax, or "death tax," which, he says, amounts to "taxing the wealth that Americans have been able to accumulate after already paying taxes throughout their working lives." He also believes the death tax "creates a series of perverse incentives that encourages the most complicated and convoluted-tax avoidance schemes."
The Believe in America plan doesn't mention what Romney would do about the Alternative Minimum Tax or individual deductions, credits, and exclusions.
According to Believe in America, Romney's long-term goal is to "pursue a conservative overhaul of the tax system that includes lower and flatter rates on a broader tax base." Romney says the "approach taken by the Bowles-Simpson Commission is a good starting point for the discussion. The goal should be a simpler, more efficient, user-friendly, and less onerous tax system."
Some CPAs, who wrestle with that "onerous" system on a daily basis, believe Romney's "tax overhaul" is simply "too timorous and too vague."
"Our current tax code stinks. That's the story in point," Greenberg said. "We have these rules and regulations that are incomprehensible and impossible to follow, and Romney isn't offering anything to change that. The only concrete thing he's saying is to extend the Bush tax cuts."
Greenberg does acknowledge that Romney's corporate tax reform position is more "interesting" and more daring. "Romney recognizes that we have one of the highest corporate tax rates in the world, and he wants to incent businesses to bring their profits back home from overseas. That's promising," Greenberg said.
But while the Romney plan, in Greenberg's opinion, may serve the CPA profession well by continuing to ensure an "ever-needed" army of tax professionals to help Americans navigate the labyrinth that is the U.S. Tax Code, he says Romney's status quo approach is simply bad business for the American economy.
Greenberg said, "This plan seems to say everything is working just fine. Well it's not working just fine. We have some very serious issues in this economy, and we need a bold plan to deal with them."