by William McBride
September 14, 2012
Obama’s tax plan is largely at odds with any commonly held notion of tax reform, including Simpson-Bowles. It would result in dramatically higher tax rates, on the order of 50 to 90 percent higher than the Simpson-Bowles tax rates on personal income and investment income. In contrast, Romney’s tax plan takes concrete steps in the direction of Simpson-Bowles, while not excessively taxing saving and investment. It lowers the top rate on personal income to match that of Simpson-Bowles and promises to reduce tax expenditures, although it appears Romney is not willing to expose the middle class, and perhaps other groups, to a full scrubbing of the tax code. It will take more specificity, leadership, and compromise to eliminate long-standing preferences like the mortgage interest deduction, but Romney is on the right track in lowering tax rates.