- Days left

Obama Win Could Cost Romney $5 Million in Personal Taxes

Mitt RomneyBy CONNIE CASS

WASHINGTON -- To see where the presidential candidates stand on taxing the rich, just look at how they'd tax themselves. Under his own proposal, Mitt Romney would pay half what he would under President Barack Obama's tax plan. For a man of Romney's means, that would be a savings of almost $5 million a year.

For Obama, not as loaded as Romney but still well-off, losing re-election could provide a tax windfall. He'd save as much as $90,000 a year if Romney's plan were enacted rather than his own tax-the-rich vision.

Two nonprofit research groups, the liberal-leaning Citizens for Tax Justice and conservative-leaning Tax Foundation, did the calculations, based on the most recent completed tax returns released by the candidates. Compared with what they owed in April, both men would be dinged in 2013 under Obama's proposal, along with other wealthy taxpayers. They could expect savings under Romney, depending on which tax breaks the former Massachusetts governor decides to oppose.

Taxes politicsWhether they go up or down, the candidates' personal tax bills won't make a dent in the nation's trillion-dollar annual deficits, of course. But they illustrate a sticking point in the struggle to fix the nation's finances: Just how much should affluent Americans pony up?

Democrats generally say the rich aren't paying their fair share; most Republicans argue that raising taxes on the wealthy would slow investment that creates jobs. The dispute makes it tougher to tackle urgent budget issues, such as whether to extend the Bush-era tax cuts again before they expire Jan 1.

Support for continuing the tax cuts for the middle class is wide, but a fight is under way over what to do about the wealthy.

"There's quite a difference at higher incomes between the Obama and Romney plans," said Gil Charney, principal tax researcher for the Tax Institute at H&R Block. "Obama is looking at the rich -- millionaires and billionaires -- as a source of additional revenue to the government, where Romney is looking at them as a potential spark for economic growth."

Obama's plan would hit couples making more than $250,000 per year from several directions, raising their tax rate, dunning them more for investment income, and limiting their tax deductions. People like Romney with earnings from private equity management would lose a big tax break. And Obama would establish a rule, named after billionaire Warren Buffett, to ensure that households taking in more than $1 million a year pay at least 30% in taxes.

Obama's health care law, already in place, also raises Medicare taxes on the wealthy, especially big investors, starting in 2013. That could cost Romney more than $800,000.

None of this would come close to balancing the budget, but it could add billions of dollars per year to help reduce the deficit.


Romney wants to lower current tax rates for everyone by 20%. This benefits the wealthy most: Dropping the highest bracket from 35% to 28%, for example, yields a much bigger savings for those at the top than lowering the 15% bracket to 12% brings for taxpayers in that group.

Romney also would eliminate the much-despised alternative minimum tax, which hits the rich and some middle-class taxpayers, too. He wants to repeal Obama's health care law and its taxes. Romney would pair his tax cuts with huge spending reductions eventually reaching $500 billion per year.

To help offset the government's losses from lower rates, Romney says he would end some tax breaks. But he hasn't said which ones, so it's impossible to calculate the effect.

At the extreme, if Romney persuaded Congress to eliminate all itemized deductions - hard to imagine politically - that could add another $1.3 million to what he owes under his own plan, according to Tax Foundation analyst Nick Kasprak.

Under that scenario, Romney's bill would still be $3.5 million less than under Obama's plan.

Kasprak expressed skepticism that Romney would target enough tax breaks to offset the tax cuts he proposes.

"You'd have to get rid of the vast majority of deductions and credits in the tax code to make it work, including some sacred cows like the mortgage interest deduction, child tax credit, etcetera," Kasprak said.

Spokeswoman Andrea Saul said Romney envisions changes to create a "fairer and simpler tax system," but did not give details.

Here's how the plans the two candidates have described so far would play out in 2013. The numbers are from calculations by Citizens for Tax Justice, corroborated by the Tax Foundation (although it would use slightly lower figures for Obama that exclude employer-paid Social Security and Medicare payroll taxes):

Taxing Romney

Assuming inflation-adjusted earnings of $23 million, he'd pay an effective rate of 34% under the Obama plan. That drops to 13% under Romney's own tax proposal -- even lower than the 15% he estimated for 2011, which irritated critics who felt a multimillionaire investor should shoulder a higher rate than middle-class working families.

The difference between the two candidates' plans: paying the taxman $7.8 million vs. $3 million.

Taxing Obama

Like others who are taxed at earned income instead of investment rates, Obama's bill wouldn't swing as dramatically under the differing plans. He reported paying an effective tax rate of almost 21% on about $790,000 in income in 2011. Under his plan, that would climb to 28%. Under Romney's plan, it drops to 18%.

The difference: $248,000 vs. $158,000.

The figures were based on Obama's 2011 tax return and Romney's 2010 return. Romney has filed for an extension and released only preliminary 2011 numbers.

Bob McIntyre, director of Citizens for Tax Justice, said Romney's savings for the wealthy come at the expense of everyone else.

"If we have more tax cuts for the rich, or even keep the ones we have now, then somebody's got to pay for it," McIntyre said, either in higher taxes or by losing government services.

At the Tax Foundation, Kasprak called Romney's plan a step in the right direction because it would lower tax rates overall and thin the tangle of deductions and credits. He called Obama's proposal "complex and arbitrary."

Odds of either candidate getting his full plan through Congress after the Nov. 6 election are slim. Efforts to reform the tax code have been mired in partisan bickering for years. But pressure is building to do something.

"Just because Romney wins or Obama wins doesn't mean that what they're proposing becomes law," said Charney of H&R Block. "What may be more likely is bits and pieces happening."


Follow Connie Cass on Twitter: http://www.Twitter.com/ConnieCass


Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

TurboTax Articles

A Brief History of Income Taxes

Did you know President Abraham Lincoln, one of America's most beloved leaders, also instituted one of its least liked obligations - the income tax? In this brief history of taxes, see the historical events which shaped income taxes in the United States today.

How to Itemize Taxes When Claiming Dependents

Claiming dependents and itemizing deductions is an effective way to save money on your income taxes. Each dependent you claim allows you to reduce your taxable income by one exemption. Get a step-by-step overview on how to take advantage of itemizing your taxes when claiming dependents in this article on tax tips.

What Extra Tax Deductions Should I Make Sure To Take?

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.

Know The Key Dates For Health Care Reform

"Open enrollment periods for the health insurance marketplace under the Affordable Care Act are limited" says Mac Schneider, a retired certified public accountant from Albion, Michigan. ?Avoiding tax penalties requires awareness of important dates that may vary year-to-year.? As well as key dates, there are time cycles and coverage gap allowances important to health insurance coverage under provisions of health care reform.

Add a Comment

*0 / 3000 Character Maximum

51 Comments

Filter by:
kelly

lets look at this from a different angle. the CEO bonuses we all heard about...10 million for example. the average household income is around 50 thousand. that bonus could support 200 families for a year. and the rich want to grip about paying more taxes when most people live off of a percentage of the tax money the rich pay. MAKES ME SICK TO THINK ABOUT IT. they also seem to forget it is the poor that do the back breaking jobs that earn them their money.

August 17 2012 at 9:27 PM Report abuse rate up rate down Reply
williamsowles

You say the Obama plan will cost Rommney five million dollars in higher taxes...we can just imagine what the Obama tax increase would do to the rest of us.

August 17 2012 at 1:26 PM Report abuse rate up rate down Reply
scottee

how much tax is enough?

A partial list of the various ways in which citizens of the US are taxed:

Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Deficit spending
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax
Hunting License Tax
Inflation
Inheritance Tax Interest expense (tax on the money)
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
Road Usage Taxes (Truckers)
Sales Taxes
Recreational Vehicle Tax
Road Toll Booth Taxes
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer Registration Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

July 05 2012 at 8:53 AM Report abuse rate up rate down Reply
co870

Thank you DailyFinance for telling the truth about the guy who lies about everything -- even when videotapes exist to prove he is lying. Open minded voters, for once please pay attention how this guy operates. Mitt Romney'sfather, George Romney, released his income tax returns for a dozen years when he ran for president. He said releasing them for one year is very misleading and can let you withold the truth. What does his son do? He releases them for one year. What is Mitt really hiding? And what is he really hiding about what he did as governor of Massachusetts? So why is his record like a time gap in his resume? Is it the health care reform law that President Barack Obama used as a model for ObamaCare? If he has nothing to hide, why did Romney spend $150,000 of Massachusetts taxpayers money to ERASE EVERY E-MAIL of HIS GUBERNATORIAL ADMINISTRATION?

Romney is also hiding his Vietnam Chicken Hawk past. In college he demonstrated for the war and FOR the DRAFT. Easy to do when you had a student deferment and then got a religious deferments for Mormon missionary work in France. When he ran as a moderate, Romney admitted he didn't want to go in Vietnam. Now that he is running as a super hawk with just about all the neo-cons who along with George W. Bush and Dick Cheney lied us into the Iraq War he said he always wanted to go Vietnam. This guy changes positions like chameleon changes colors. Don't take my word, google or yahoo it. Ray A. Cohn, retired reporter.

June 08 2012 at 2:45 PM Report abuse rate up rate down Reply
1 reply to co870's comment
paladinlvs

He faced the draft in 1970 and was not drawn. Where were you?

August 17 2012 at 10:09 AM Report abuse rate up rate down Reply
co870

Mitt Romney continues to lie, take things out of context, play seek and hide with the media and be dishonest with the American people. He claims he is a businessman and not a politician. Except since he ran as "a moderate" in Massachusetts for the US Senate taking positions on social issues that were to the left of Sen. Teddy Kennedy, he became the ultimate career politicians he now so decries.

You have to really go through his record see what position he took when and FOR WHAT OFFICE HE RAN. Obviously this guy on does what is best for Romney and he' will say anthing, do everything and llie consistently to achieve his goal. Then he will cover his tracks and try to distract everybody and smear them -- if necessary -- to protect his ass.

Clearly the purpose of his tax cuts is to help himself and his gang of fellow super millionaires and billionaires who are now armed with Cittizens United -- the decision by a partisan Republican/corporate majority on the US Supreme Court that the super rich and their corporations can buy elections by donating unlimited amount of money to finance campaigns. Simply put, it's a decision that legalizizes special interest bribery.

The nonsense that these are the job creators is historically well proven. Bill Clinton hiked the top income tax rate from 35 to 39 percent and Republicans went hysterical. But there was no recession.; Instead the economy created 23 million jobs and he left office with the last federal budget surplus. The geatest economic growth at nearly full employment occurred when federal income taxes were 80 and even 90 percent.

George W. Bush had the income taxes lowered to the pre Clinton era rate. He also implemented massive deregulation, lack of enforcement of existing laws, had two unpaid for wars and doubled the national debt. The bottom line -- the ultimate business Schlemiel who ran all of his four oil companies into the ground -- did the same to the American economy.

Now Romney wants more of these tax cuts and other Bushista failed policis so he and his greedy super rich buddies will have lower taxes. A $5 million saving is a pretty good motive. And does it create jobs? Romney has millions of dollars laying around in countries like Switzerland, Ireland, and the Grad Cayman Islands. He pays about 15 percent "capital gains" tax on them. How does that create jobs? At the same time a top wage earner pays 35 percent. Romney's idea of fairness. And, of course, the quarter of a billionaire pretends he is the victim. Typical GOP BS. Don't be fooled. Ray A. Cohn, retired political and investigative reporter.

June 08 2012 at 2:21 PM Report abuse rate up rate down Reply
tj1108

I got news for you. If Obama wins its going to cost all of us, and in ways you cant measure in dollars.
Romney having to spend 5 mil is nothing compared to lost liberty for 2 or more generations.

June 07 2012 at 11:23 AM Report abuse +1 rate up rate down Reply
tsimpson2333

However today Mr. Bill Clinton has called for the continuation of the Bush tax cuts, saying it is best for the economy at least for now.

June 06 2012 at 2:06 PM Report abuse +2 rate up rate down Reply
granaryst

Obama win will cost us our freedom.

June 06 2012 at 12:07 PM Report abuse +2 rate up rate down Reply
ha6ai

OK HuffPuff and AP! Enough Obama-propaganda Romney-bashing for today!

Instead, lets ask what does Bill Clinton think about Barak Obama's attacks on Mitt Romney?

(1) Per Clinton: Romney had a "sterling business career". (Obama was unfair and wrong in libeling Romney by calling him a "vulture capitalist" who lost jobs - per Clinton the opposite is true.)

(2) Per Clinton: Obama is wrong about continuing the "Bush tax cuts" (actually now the "Bush-Obama tax cuts"). Per Clinton: The Bush tax cuts should be continued for both the "rich" and "middle class".

(3) Per Clinton: The "Recession" is not over, contrary to Obama's claim that the "Recession" is over and we are in "recovery". Per Clinton, the "Obama Recession" continues.

LOL!

June 06 2012 at 4:20 AM Report abuse +1 rate up rate down Reply
democracks0

Where's Evan at? For months he's been posting crap that Scott Wlker was going to be recalled. Well Evan Scott Walker was not recalled. The American people spoke and told the union thugs to stick it!!!!!!!

June 05 2012 at 10:44 PM Report abuse rate up rate down Reply