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GOP Releases Tax-Reforming Presidential Platform

by Mike Godfrey,, Washington

03 September 2012

At its national convention to select United States presidential nominee Mitt Romney, the Republican Party has also approved a party platform that pledges it will ‘begin anew, with profound changes in the way government operates: the way it budgets, taxes and regulates.’

Above all, the platform talks of returning “government to its proper role, making it smaller and smarter", by restructuring government’s most important domestic programmes "to avoid their fiscal collapse", and by keeping taxation, litigation and regulation to a minimum.

With regard to combating unemployment, it considers that “the best jobs programme is economic growth”, but not through “another made-in-Washington package of subsidies and spending”. Both individual and corporate tax codes must be simplified with the ultimate goal being "a tax system that is simple, transparent, flatter, and fair".

GOP proposes to extend the 2001 and 2003 Bush tax cuts in their entirety, pending reform of the tax code; reform the tax code by reducing marginal tax rates by 20% across-the-board in a revenue-neutral manner; eliminate the taxes on interest, dividends and capital gains altogether for lower and middle-income taxpayers; end the estate tax; and repeal the alternative minimum tax.

As in previous policy statements, there is no disclosure by the Republican Party on how the tax rate cuts would be made “revenue-neutral”. In particular, there is no specific detail on which tax credits or expenditures would need to be curtailed or abolished.

On the subject of the US corporate tax rate, the highest in the OECD, the platform notes that its effect is “to reduce [US] worldwide competitiveness, encourage corporations to move overseas, lessen investment, cripple job creation, lower US wages and foster the avoidance of tax liability - without actually increasing tax revenues”.

It calls for a reduction of the corporate rate to keep US corporations competitive internationally, with a permanent research and development tax credit and a repeal of the corporate alternative minimum tax. It also supports a switch to a territorial system of corporate taxation, “so that profits earned and taxed abroad may be repatriated for job-creating investment here at home without additional penalty”.

In addition, however, the Party stipulates that any move to establish a federal value-added tax or sales tax should be tied to the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax, in order to "guard against hyper-taxation of the American people”. The Party also calls for a constitutional amendment requiring a Congressional super-majority for any tax increase and imposing a cap limiting spending to the historical average percentage of gross domestic product, “so that future Congresses cannot balance the budget by raising taxes”.

On the same day as the release of the platform, remarks made by President Barack Obama at a campaign event in Colorado reiterated his criticism of GOP policies as “an economic plan that says if you just give big tax cuts - USD5 trillion worth - mostly to wealthy folks - so that somebody who makes USD3m a year would get another USD250,000 in additional tax cuts - somehow prosperity will rain down on everybody else”. The US, he said, tried that for a decade and it didn’t work. "It didn’t work then, it won't work now”, Obama remarked.

TAGS: tax | economics | value added tax (VAT) | sales tax | fiscal policy | budget | corporation tax | tax credits | tax rates | United States | dividends | tax reform | individual income tax | research and development

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