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Some form is one of the most divisive issues of the presidential campaign right now -- both President Obama and GOP hopeful Mitt Romney sharing drastically different visions for the tax code.
The Tax Foundation examined Romney's plan and how to impact our economy and of course your tax bill.
So -- the results Tax Foundation president Scott hi Scott.
Give -- the headline is it good or bad for the economy.
Was very good Tracy when we analyze the plan using what we call a sort of a dynamic model.
We find out that so when you cut individual tax rates across the board by 20%.
And especially when you cut the corporate rate by ten percentage points from 3525%.
It has a very very strong effect on economic growth over the long term.
And that translates into higher in comes for all Americans and so as a result.
Even when you offset some of these spending cuts with base broadening his you know eliminating no loopholes.
Everyone ends up better off in the long run with higher incomes.
And basically higher standards of living.
It's important point to make that he's lowering the rates by 20% not to 20% I think that it's -- in the press along the way so basically it's -- 35%.
Will go down to 28%.
Lot of people without questioning how is gonna pay for this -- he's talking about eliminating things to like the estate tax.
And the Alternative Minimum Tax that's a huge revenue raiser that AMT how to get away with that.
Well -- certainly a lot of this comes down to two factors in order to pay for it.
No one is you have to look at it from the economic growth side and when we look at the economic of benefits of cutting taxes across the board.
If you really end up losing only about half of what you would if you look at it simply on -- static basis and that means we have to do a lot less base broadening are a lot less.
Loophole cutting than we normally would and so that -- reduce the overall cost of the plan substantially and makes a lot less so difficult.
To do these sort of measures to cut the cost to be Simpson is that the growth created will pay for the -- it will cover a piece of -- revenue race.
That's correct not all -- but some.
Okay and then we we also hear though he's gonna caps and big tax breaks do we know in particular what breaks he's talking about.
No I -- he's been obviously.
Very elusive about that and why not you know why get into a fight about this before the election.
When it's something you're gonna have to do down the road.
When working with congress to find try to figure out these details much in the same way that Obama didn't fill out the details.
Of -- health care plan he waited until they got in to go to negotiations with congress.
And I think Romney's playing the same game you lay out the big picture.
Try to get people enthused about this and then work worry about the details later on when you really have to negotiate -- members of congress.
Another lesson from the already -- -- have later I mean that seems to be where we are even with our current.
Fiscal cliff in the taxes that were coming up on his -- 31 right.
We'll worry about it later here we are we're coming up on it again and you're thinking much like everybody else and they're just gonna punted to next year aren't you.
Well Heidi I think that if you look at congressional patterns they always wait until the eleventh hour to do the right thing -- so I think we're gonna see this after the election what we call the lame duck session.
They're gonna get together and they're gonna say -- swear get a new president new congress coming and let's just punt this down the road -- maybe have a four or five month extension of all of these -- expiring tax provisions and let the next congress next president deal with it.
And that'll give them more time so yeah this is a big.
Kick down the road and we'll let the next guys figured out.
I love that you said they basically have the tax code on a year to year at least it's strip out the RA -- -- -- -- one of the things that bothers you the most is that.
58 million taxpayers have no skin in the game.
We'll -- ever be changed and they don't pay any federal income tax or is it just too politically incorrect to -- but to address.
Well it's going to be very difficult to do so once you've knocked people off the tax rolls.
Then it's hard to put him back on in -- a lot of these people are getting cash payments they're getting about a hundred billion dollars a year.
-- refundable tax credits even though they don't pay any income taxes so the 88 -- become like -- -- ATM machine for welfare benefits.
It's gonna be hard to put that or -- in the barn.
That's why I think ultimately.
We need fundamental tax reform it's the only way to deal -- all these problems that wants and you and you sort of have the trade off of try to put people back on the -- want -- lowering rates at at its going to be a tough call.
That earned income tax credit making a lot of people some money out there Scott -- of the Tax Foundation that was great thank you very much.