99% vs. 1%: Who Gets the Bigger Tax Break in Gingrich Plan?

Republican presidential candidate Newt Gingrich’s tax plan would give the vast majority of middle-income American households a tax break, according to an analysis by the nonpartisan Tax Policy Center.
Gingrich’s plan would cut taxes for Americans in all income groups in 2015, compared to current tax policy, the analysis found.
But while most of the lowest income families would get little to no benefit from these tax cuts, the richer the household the bigger the tax cut and percentage gain in after-tax income, the Tax Policy Center reported.
Gingrich’s plan would also add $1.3 trillion to the U.S. budget deficit in 2015 alone.
“He’d reduce revenues in 2015 by nearly $1.3 trillion, or 35 percent of federal taxes that year. Talk about starving the beast!” said Howard Gleckman, a resident fellow at the Urban Institute and editor of TaxVox.
The disparity in tax breaks is stark between the lowest income group and the super rich under the plan by Gingrich, who is currently the frontrunner for the GOP nomination.
Middle-income earners fare well. More than 91 percent of households earning between $50,000 and $75,000 a year would get tax cuts averaging $1,847, boosting their after-tax income by 3.1 percent.  Those households would see a tax rate of 14.4 percent.
More than 95 percent of households earning between $75,000 and $100,000 a year would receive cuts averaging $3,050, improving their after-tax income by 3.9 percent. That brings their tax rate to 15.9 percent.
However, the tax breaks get bigger with household income levels, as do percentage gains. Those earning more than $1 million a year would receive an average tax cut of $613,689 in 2015, compared with what they pay now. That amounts to an after-tax income boost of 28.7 percent, with an average tax rate at 11.9 percent.
“Nearly 82 percent would get a tax cut. About 45 percent of the lowest-earners, and 98 percent of middle-income households come out ahead.,” Gleckman said. “For those roughly 130,000 lucky duckies in the top 0.1 percent, the windfall is eye popping. They’d get an average tax cut of $2.3 million. And their total federal tax bill would plunge from 38 percent of their income to barely 10 percent.”
Gingrich’s individual “flat tax” proposal would give taxpayers an option to pay a single 15 percent tax rate, with some major modifications. The plan would not tax capital gains, dividends and interest income.
Under the Gingrich plan, taxpayers could claim a standard exemption of $12,000 for each individual and dependent, while the plan would eliminate the standard deduction and most itemized deductions and credits, under the Gingrich proposal. However, it would retain deductions for mortgage interest and charitable contributions , and the child and earned income tax credits.

One thought on “99% vs. 1%: Who Gets the Bigger Tax Break in Gingrich Plan?

Leave a Reply

Your email address will not be published. Required fields are marked *