Mitt Romney has proposed massive new tax cuts and promised to balance the federal budget. How will he achieve these seemingly contradictory goals?
For now, he isn’t saying. And, in fact, his campaign has been sending out vague and somewhat conflicting signals about where the money would come from to finance his rate cuts and other tax reductions.
When Romney rolled out his latest revenue plan on Feb. 22, senior aides were asked how he’d pay for these substantial tax reductions (TPC estimates they’d add $900 billion to the deficit in 2015 alone—about $400 billion from extending the 2001/2003 tax law and another $500 billion in new rate reductions and other tax cuts). Their response: Tax cuts would be funded by offsetting tax increases combined with stronger economic growth and changes in behavior driven by the tax reductions themselves.
The aides did not identify which taxes Romney would raise or estimate the economic effects of his plan. But they were clear that his tax reductions would be funded inside the revenue system. And, at least by their calculation, Romney’s new initiative would not be a net tax cut at all. It would be a classic tax reform—lowering rates while eliminating tax preferences. But it would result in no net change in tax revenues (at least as Romney measures it).
But then that story began to shift. On March 1, The Wall Street Journal’s John McKinnon wrote this: “Governor Romney’s tax cuts will not increase the deficit,” Romney spokeswoman Andrea Saul said in a statement. ‘They will be fully paid for through a combination of economic growth, base broadening, and spending restraint. Any analysis that claims otherwise is incomplete.’”
Note the addition of spending restraint as an added source of funds. In this formulation, Romney may indeed be promising a net tax cut—partially financed with (unidentified) spending reductions. Saul’s comments appeared in several other news stories on that day.
However, there is yet another complication: She did not say whether she was talking about all Romney’s tax reductions or only those in addition to extending the 2001/2003 law. The campaign could clarify this but so far has not.
On March 7, the story changed again. When asked in a CNBC interview how he’d fund his tax plan Romney said he’d “limit deductions and exemptions to pay for most of that. Growth would pay for the rest.” Romney said nothing about more spending cuts.
Then, Romney went further. He said that curbs in credits and deductions would exempt middle-income households who would continue to receive the benefits of tax breaks such as the deductions for mortgage interest and charitable contributions. Any cuts in tax preferences, he said, would be “primarily limited” to those with high incomes.
That sounds an awful lot like President Obama, who has proposed capping the value of tax preferences to 28 percent and vowed to never raise taxes on those making $200,000 or less.
Romney has further constrained his own options by promising to cut the capital gains rate to zero for those making less than $200,000 while freezing it at 15 percent for high-income households.
If Romney is promising to curb hundreds of billions of dollars annually in tax preferences while leaving popular middle-class deductions and credits unscathed, he has set a hugely challenging goal for himself. And he owes us an explanation of how he is going to do it—before the election.
If you are interested in a serious but accessible look at my favorite topic—tax reform—check out two new books. One, The Benefit and the Burden Tax Reform: Why We Need It and What It Will Take by Bruce Bartlett, focuses on individual reform. The second, Corporate Tax Reform: Taxing Profits in the 21st Century by Martin A. Sullivan, aims at…well, you’ve probably guessed by now.
Bruce’s contribution, a full–throated call for reform, has gotten a surprising amount of attention for a tax book. Even Jon Stewart had Bruce on the other night. And the notice is well-deserved. He’s written a clear, well-reasoned brief for reform.
A prolific writer who has worked for several Republican members of Congress (including Ron Paul back in the day) and in the administrations of presidents Reagan and George H.W. Bush, Bruce makes no secret of his goal. He wants to convince you that the tax code is a mess and needs a major overhaul. As he memorably puts it, the code is a garden that hasn’t been weeded since 1986. It is an apt image.
Bruce has made something of a second career expressing his, let us say, disappointment in the Republican Party where he made a home for so long. And The Benefit and the Burden mercilessly skewers some loopy ideas now floating around the party such as the Fair Tax (which he calls “completely unworkable”) and the theory that lowering taxes will cut the size of government—a claim that, while entirely discredited, won’t go away.
In the end, Bruce makes a case for phasing in a well-designed Value-Added Tax, both to help reduce the deficit and in the name of economic efficiency.
The Benefit and the Burden tackles the often-daunting topic of tax reform with short chapters, lots of suggested readings, (and– full disclosure–kind words for the Tax Policy Center). If I have a quibble, it is that while the book is aimed at general readers, it sometimes assumes a level of knowledge about economics and taxes that most Americans don’t have.
Marty Sullivan—an economist and long-time columnist and blogger for the highly-respected journals published by Tax Analysts, has written a different kind of book. Marty focuses exclusively on the corporate tax and, in about 150 pages, tells you everything you’d want to know about how we tax these firms, why we should do better, and how hard it will be to accomplish that goal.
Marty supports reform, but his book plays it straight down the middle. For a lay reader, corporate taxation can be pretty overwhelming stuff, but Marty is a terrific writer and makes the story as accessible as possible. And unlike many books on the subject, Corporate Tax Reform doesn’t ignore the often-ugly politics behind the tax laws
While politicians deal in cheap rhetoric about cutting corporate rates and closing business “loopholes” without ever identifying which tax breaks they’d kill, Marty doesn’t flinch. Corporate Tax Reform offers a clear-eyed look at many of those preferences and the price of ditching them.
These two books are important additions to the libraries of readers who want to learn more about how the tax system really works, and explore ways to fix it.
The Tax Policy Center has updated its analysis of Mitt Romney’s platform to reflect his proposed new tax cuts. And the result: Lower taxes for nearly everyone. The highest-income households would pay significantly less, while few with the lowest incomes would benefit. And without offsetting revenue increases or new spending cuts, Romney’s plan would significantly increase the budget deficit.
Romney’s initial tax plan was blasted by many Republicans as too cautious, so last week he rolled out a far more ambitious proposal. Instead of simply making the 2001/2003 tax cuts permanent , abolishing the estate tax, eliminating taxes on investment income for those making less than $200,000, and cutting corporate tax rates, Romney threw the long ball.
On top of his original plan, Romney proposed cutting all ordinary income tax rates by 20 percent and eliminating the Alternative Minimum Tax. While Romney said he’d offset the lost revenue from these new tax cuts by trimming deductions, credits, and exclusions, he did not say how.
The cost of the new Romney plan? For 2015, when changes would be fully effective, he’d add nearly $500 billion to the budget deficit, even after extending the 2001/2003/2010 tax cuts. If the tax cuts are allowed to expire, he’d add $900 billion to the deficit in 2015.
Two caveats: First, Romney has not described how he’d broaden the tax base, thus TPC could only score his proposed tax cuts. Second, on Wednesday TPC released 10-year revenue projections for two changes Romney added to his plan—the across-the-board rate cut and repeal of the AMT. Those estimates are very different, in part because they only included two elements of his plan. This projection—for one year rather than 10—looks at his entire proposal.
Romney aides also say high-income households would pay about the same share of taxes under his new system as they would if he extended the 2001/2003 tax cuts. But, without those unidentified revenue increases, they would pay a considerably lower share.
For instance, those making $1 million or more would enjoy an average tax cut of 8 percent of income or roughly $250,000 (relative to a world where the Bush/Obama tax cuts remain in place) compared to an average cut of less than 4 percent of income, or $2,900, for all households. Because Romney would repeal President Obama’s 2009 tax cuts, those making less than $10,000 would pay an average of $100 more in taxes and only about 11 percent would get any tax cut at all.
Romney would cut taxes for nearly all households making between $50,000 and $75,000 but by far less than those with higher incomes. On average, those making $1 million or more would see their after-tax incomes rise by nearly 12 percent while incomes of households earning $50,000-$75,000 would rise by only about 2 percent.
Romney’s promise to make his new system as progressive as today’s puts him in a difficult policy box. Which tax preferences aimed at upper-income households could he dump to keep the code progressive while not adding hundreds of billions to the deficit?
Raising rates on capital gains and dividends might help, but he’s already promised to cut them to zero for those making $200,000 or less and hold them at 15 percent for everyone else. Eliminating or restructuring tax breaks for retirement savings, mortgage interest, and employer-sponsored health insurance could make Romney’s low-rate system more progressive, but these changes would be hugely controversial. Besides, while they’d target many of the merely rich, they wouldn’t matter much to the uber-wealthy who benefit most from Romney’s rate cuts.
Romney seems to be trying to walk a fine line between responsible fiscal policy and pandering to his base. But by not identifying how he’d pay for his generous tax cuts, his tightrope is getting pretty wobbly.
Last week, Mitt Romney proposed a new tax plan that would, among other things, reduce individual tax rates by 20 percent across the board and repeal the Alternative Minimum Tax. To get a rough sense of what those two tax cuts would cost, the Tax Policy Center crunched the numbers. The result: They would be really, really expensive.
TPC found that repealing the AMT and cutting rates by 20 percent would increase the deficit by more than $3 trillion over the next 10 years, even after the 2001/2003/2010 tax cuts are extended.
Romney says the rate cuts and AMT repeal would be paid for by faster economic growth, changes in taxpayer behavior, and reductions in individual tax credits, exemptions, and deductions. This being the middle of a campaign, Team Romney won’t say what tax breaks he’d eliminate. Nor will it say how much growth it expects the tax cuts will generate. And while aides insist his overall plan including the unspecified offsets would raise roughly as much money as the existing system, even this gets complicated because Romney has created a new baseline against which he’d measure these changes.
Keep in mind that TPC did not try to estimate revenues for Romney 2.0. There are other tax cuts in that plan, but we took two of the biggest and projected what would happen. As a result, TPC has come up with a conservative estimate of how big a hole Romney would have to fill if he intends to pay for these tax cuts.
To start, TPC took a world where the 2001/2003/2010 rate cuts are already made permanent and the AMT is temporarily patched. Then, modeler Dan Baneman figured what would happen if the AMT is abolished entirely. Next, he looked at what happens if today’s rates of 10-15-25-28-33-35 are each cut by 20 percent so they become 8-12-20 etc. up to a top rate of 28 percent.
TPC did figure people would change their behavior in the wake of rate cuts this big, and incorporated those responses in the estimate. But TPC did not take into account any economic growth the rate reductions might generate.
I suspect they would boost growth, but nobody has a credible way to measure by how much. And despite the fervent wishes of tax cutters everywhere, there is simply no evidence that tax cuts ever generate enough growth to pay for themselves.
The bottom line: Leaving aside any broad economic benefits, the AMT repeal would increase the shortfall by $670 billion while the rate cuts would add about $2.7 trillion to the deficit. That’s more than $3 trillion over 10 years. In 2022 alone—the last year TPC estimated—the twin changes would add $450 billion to the deficit.
Romney has taken to campaigning under one of those digital debt clocks that shows the flow of red ink increasing by the second. But if he can’t find about $3 trillion to offset this exceedingly generous tax cut, that clock will be running a lot faster on his watch than it does today.
Reform plans by Obama and GOP leaders such as House Ways & Means Committee Dave Camp (R-MI) seemed simpatico. Both sides embraced lower rates. Both endorsed ending business tax subsidies, through neither had much to say about which ones. But on one fundamental issue the gap between Obama and the GOP remains wide.
How would they tax foreign earnings of U.S.-based multinationals? Both sides agree that the current system is the worst of all worlds: It is immensely complicated, wildly distorts economic decisions, and collects little revenue.
But when it comes to the solution, Obama and the Republicans seem headed down different roads. Obama wants to force U.S. companies to pay more tax on their overseas profits. Many Republicans would exempt offshore earnings from U.S. tax liability.
To understand where reformers are headed, think about today’s system. Under our current worldwide structure, foreign subsidiaries of U.S.-based firms must pay U.S. tax no matter where they earn their income. To prevent profits from being taxed twice, those firms get a credit against their U.S. tax for the levies they pay to other countries.
Those foreign tax rates are nearly always lower than in the U.S. But because U.S. rates are relatively high, companies game the system to avoid domestic levies on their overseas income, and even to reduce U.S. tax on domestic income.
Under a practice known as deferral, U.S. firms don’t pay U.S. tax until they bring their profits home. This allows them to reinvest earnings in foreign subsidiaries and, in effect, never pay those high U.S. rates.
Firms also use sophisticated accounting gimmicks to shuffle income to low-rate countries while shifting deductible expenses back home, where they can offset domestic profits and lower their overall U.S. tax liability. Sometimes, they actually move their production—and their jobs—overseas to avoid U.S. tax (though that’s rarely the most common reason).
All of this allows many multinational firms to pay effective tax rates well below the 35 percent statutory rate that is getting all the attention. Often they pay less less than they might under a territorial system.
What to do?
Obama would impose a minimum tax on multinationals—effectively forcing them to pay immediate tax on foreign income even if they never return the money to the U.S. But Obama’s plan would be incredibly complicated and may drive more companies to move overseas, since the minimum tax would only apply to U.S.-based firms.
Some Republicans would shift the U.S. to a territorial system and effectively abandon efforts to tax active overseas income of U.S. multinationals. All companies—foreign or domestic– would pay tax on U.S. profits. But domestic firms would owe no U.S. tax on overseas income, either when their foreign subsidiaries earn it or when they pay it as dividends to their U.S. parent.
This would move the U.S. closer to the territorial systems used by most of the world. But such a shift might encourage some domestic companies to move more of their operations—and shift both jobs and more reported income– to low tax countries. Preventing such an exodus would require a complicated new set of rules.
Is there some middle ground between the Obama view and the GOP position? Maybe. Perhaps there is a way to increase taxes on foreign profits as they are earned but lower the additional tax companies pay once profits are returned to the U.S. This could raise U.S. taxes on income earned in tax havens but reduce the penalty for bringing foreign earnings home.
But this is complicated, vexing stuff. And it will require honest cooperation among serious tax mavens, not the sort of political one-upmanship that infects most everything else in Washington.
Mitt Romney has added a new plank to his campaign tax platform: Cut all ordinary tax rates by a fifth. That would bring the top individual income tax rate down to 28 percent and cut federal revenue by perhaps $200 billion a year. Romney says that a combination of economic growth and base broadening would make up that revenue loss.
But he’s put a few pretty big hurdles in the way of making sure his plan does not add to the deficit. He would repeal the alternative minimum tax (AMT) and thus eliminate a major backstop against revenue losses from his rate cuts. He’d retain the current 15 percent top tax rate on long-term capital gains and qualified dividends and do away entirely with taxes on that income for households making less than $200,000. And he promises not to increase the share of income tax paid by low- and middle-income households. That means any tax increases would have to fall entirely on the rich.
Assuming no other changes, the 20-percent cut in rates reduces taxes most at the top of the income distribution. The top rate would come down 7 percentage points, compared with just 3 percentage points for the 15 percent tax bracket. As a result, maintaining the tax share paid by the rich requires trimming their tax preferences much more than those of other households.
What could Romney target? The rich benefit disproportionately from three tax preferences: the reduced rates on gains and dividends, exclusions from income, and itemized deductions.
Romney has already taken the first off the table and it’s big—75 percent of the tax savings from low rates on capital gains and dividends go to the top 1 percent, cutting their tax bills by nearly a quarter. As for exclusions, the biggest are employer-paid health insurance premiums and retirement savings, which benefit most taxpayers—only a small fraction goes to high-income households. And Romney says he’d keep major deductions and won’t accept provisions limiting their value for the rich.
That leaves Romney trapped in a policy dead-end. After promising to retain lots of tax preferences, Romney has no clear way to recoup the revenue he loses by cutting rates. So he offers no specific proposals to broaden the tax base—promising those will come later.
Economists generally favor the principles behind Romney’s plan: Lowering rates and broadening the base is good policy. But a plan that cuts rates and only promises unidentified future base-broadening? Not so much.
Republican Presidential candidates say–all the time–that they hate budget deficits. A linchpin of each of their campaigns is a promise to slash government and eliminate the deficit and the national debt. So which one of them would accomplish this ambitious goal?
According to a new analysis from the non-partisan Committee for a Responsible Federal Budget, none of them would. At least not through the next decade. In fact, compared to what the fiscal watchdog calls a realistic budget baseline (that is, if the government continues on the track it’s on today) all of the GOP candidates, save for Ron Paul, would make matters worse.
Rick Santorum and Newt Gingrich would make things far, far worse. Mitt Romney’s tax and spending plan wouldn’t bend the debt curve very much one way or the other. But, according to CRFB, if he doesn’t find a way to pay for his latest plan to cut tax rates by 20 percent Romney would significantly increase deficits and the debt as well.
Except for Paul, each of the candidates has the same problem. They have enthusiastically promised to cut taxes in very specific ways—sometimes by vast amounts. But when it comes to offsetting spending reductions or cuts in tax breaks, they mostly offer little more than platitudes.
A few numbers: The group figures that if government policy stays on track, the national debt would grow from 78 percent of Gross Domestic Product today to 85 percent in 2021. Paul would pare that to about 76 percent.
With Romney, the debt would change little from the CRFB baseline but only if he finds tax hikes to offset those 20 percent rate cuts. He has not said what those revenue increases would be, and without them, he’d add about $2.6 trillion to the debt and drive it to about 96 percent of GDP. Santorum would increase the debt by $4.5 trillion to 104 percent of GDP. Gingrich would add $7 trillion to the debt and drive it to 114 percent of GDP.
Some caveats: CRFB compares the campaign plans to a baseline that assumes 2001/2003/2010 tax cuts are permanently extended, the Alternative Minimum Tax “patch” continues to protect millions of middle-class families, the legislated cut in Medicare physician payments never happens, spending on the wars in Iraq and Afghanistan gradually comes to an end, and the automatic spending cuts that are due to kick in at the end of this year will be canceled.
In addition, the analysis does not assume any economic growth from the candidates’ proposed tax rate cuts though some is possible. It also looks only at the next nine years, and not over the long run. The group calculated a high- low- and intermediate- range of deficit effects for each candidate. I’m citing the middle-range.
The group acknowledges its effort is a work in progress and it will revise its estimates as campaign promises change over the next eight months. Finally, CRFB did not score President Obama’s agenda in today’s exercise, but will once the general election is underway.
Cutting the national debt should not be the only goal of any president. Stuff happens, as you may have noticed in recent years. We fight wars. The economy collapses. Priorities change.
But with these candidates making the deficit such a big part of their campaign rhetoric, the CRFB scorecard is a very useful reality check. Give it a read.
Here’s what I love about President Obama’s Framework for Business Tax Reform: His diagnosis of the problem is spot on. In just a few pages, the Treasury Department does a marvelous job describing what’s wrong with the way the U.S. taxes business. Anybody interested in understanding why the tax code is such a mess should read this.
Here’s what I don’t like: After doing a great job explaining the problem, Obama often flops when it comes to a cure. Sure, he proposes cutting the corporate rate. These days, who doesn’t? But when it comes to which tax preferences he’d dump, Obama often ducks the tough choices. More troubling, some of his proposed cures may make the disease worse.
Here are a couple of examples. The joint White House and Treasury Department paper explains what’s wrong with business subsidies and high tax rates. One big flaw: this toxic brew distorts business decisions. It encourages firms to finance with debt instead of equity, it drives firms to organize as pass-throughs such as partnerships to avoid paying taxes twice on corporate profits, and it drives investment to low-tax industries and away from high-tax industries.
So far so good. But now, Obama’s cure: He proposes to cut rates for all non-manufacturing corporations from today’s top rate of 35 percent to a flat 28 percent. Manufacturers would enjoy a more generous 25 percent rate, and “advanced manufacturing”, whatever that is, would receive an even lower rate. But wait a minute, didn’t the president just tell us that it is bad thing to use the tax code to distort investment decisions?
Similarly, he decries income shifting by U.S. based multinationals. But his solution, an alternative minimum tax on overseas profits, seems entirely wrongheaded. He says this would prevent companies from moving profits overseas. Maybe it would. But more likely it would encourage companies to move themselves overseas. Companies domiciled on sunny Caribbean islands would not be subject to this new AMT, only U.S. firms would.
On the other side of the ledger, Obama does what all of his GOP rivals have done. He parades his lower rate, but never quite says which tax breaks he’d eliminate.
Obama does pluck a few low hanging fruit, at least for his base. As he’s promised in the past, he’d tax carried interest at ordinary income rates, eliminate oil and gas preferences, raise taxes on buyers of corporate jets, and boost taxes on insurance companies. But this is the equivalent of promising to balance the budget by eliminating waste, fraud, and abuse and foreign aid. It won’t come close to paying for a 7 percentage point and more cut in rates.
When it comes to the really tough stuff such as broad changes in depreciation rules or interest deductions, Obama is silent. In fairness, given the challenges of making these reforms, his 28 percent rate is probably more realistic than the GOP alternatives.
Newt Gingrich, for instance, says he’d cut the corporate rate to an impossibly low 12.5 percent without ever saying how he’d pay for it. Rick Santorum says he’d cut the rate on manufacturing to zero with saying how he’d pay for that.
In all, Obama’s plan is a modest but useful step in the direction of reform. We now have all the major presidential candidates on record supporting lower rates and a broader base. House Ways & Means Committee Dave Camp (R-MI) will have his own proposal very soon. By recent Washington standards, that is progress.
Of course, there are big disagreements on how low to take rates and mostly black boxes when it comes to which tax preferences to eliminate. And there is a yawning chasm between Obama, who would collect at least as much in business taxes after reform as government does today, and most Republicans, who would deeply cut business taxes. But at least they all are, in their way, talking.
The other day, I criticized the unwillingness of Congress to finance the latest extension of the payroll tax cut. Since that blog, the Congressional Budget Office released its estimates of the cost of the entire mini-stimulus, including the so-called “doc fix” and changes in unemployment compensation. And the games were even worse than I feared.
Congress made no pretense of paying for the payroll tax cut itself. But it did claim it would pay for the rest of the package. Hint: It didn’t.
There are two bits of legerdemain happening here. Both are functions of the 10-year budget window the Congressional Budget Office and the Joint Committee on Taxation use to score legislation.
The first gimmick allows Congress to pretend tax cuts or new spending are temporary, when it is obvious to all they are not. The second is a sort of congressional lay-away plan. Lawmakers get to buy politically popular policies today but avoid paying for them until years from now.
There is nothing new in all this. Congress has been playing games with the 10-year budget window (or its cousin the 5-year window) for decades. But the mini-stimulus showed business as usual is alive and well on Capitol Hill, despite the best efforts of the tea party caucus.
The doc fix is a perfect example of Gimmick #1. Even though Congress has been temporarily protecting physicians from scheduled Medicare cuts for a decade, CBO must score only what Congress proposes.
So when lawmakers protect docs for only a year (or in this case 10 months) at a time, CBO has no choice but to score only the one-year cost. Thus, the limited fix appears to add only about $18 billion to the deficit over the 10-year budget window when the true 10-year expense of keeping the doc fix going would far exceed $200 billion.
Perhaps the payroll tax cut, which is supposed to be a stimulus measure, really will be allowed to expire at year’s end (though I doubt it). But the doc fix is not countercyclical economic policy. Like old man river, it just keeps rolling along. A year at a time. Since 2002, if you can believe it.
Here’s Gimmick #2. Most of the cost of the doc fix comes in fiscal years 2012 and 2013, as you’d expect with a “temporary” extension. But the measures to pay for them—a reduction in Medicare payments for hospitals’ bad debts and a cut in a preventive care program, don’t kick in until 2014 and beyond. One provision–a hike in federal employee retirement contributions for new workers–won’t start raising real money until 2016.
Will any of these pay-fors actually happen? Don’t bet on it. Already, Senate Democratic Leader Harry Reid (D-NV) has promised to restore the preventive care money. That took, what, four days?
In theory, this kind of budgeting makes sense. After all, while the economy seems to be recovering, it remains sluggish. Why not inject additional fiscal stimulus now and arrange to pay for those initiatives in a couple of years when the economy presumably is stronger?
The problem: Many of these pay-fors never quite seem to happen. Instead, Congress just creates more “doc fixes.” Remember, the first fix was aimed at blocking cuts in Medicare physician payments that were included in the Balanced Budget Act of 1997.
Yes, Virginia, Congress promised that cutting reimbursements to docs would help eliminate the deficit. And, as Sarah Palin, might ask, “How’s that workin’ out for ya?”
The 2-percentage-point payroll tax cut extended by Congress in December and again last week will save workers a total of $114 billion this year, according to the Joint Committee on Taxation. Spread over nearly 160 million workers, that’s an average tax cut of $714. Yet the typical news report says “the average worker earning $50,000 [will] take home an extra $1,000.”
That’s a big difference. What’s going on?
The calculation implicit in the news report is simple arithmetic—2 percent of $50,000 is $1,000. But the average worker earns much less—just under $40,000 in 2010, according to the Social Security Administration. That suggests that the average tax saving would be about $800, still more than $714.
The remaining difference results from the Social Security tax cap–$110,100 this year. Since incomes over the cap go into the overall wage average, the average wage subject to the Social Security tax is less than the average for all pay, roughly 10 percent less.
But TPC estimates that the average tax reduction will total $921, well above the average worker’s savings. That’s because TPC looks at tax units—individuals or couples who file tax returns (or would if their incomes were high enough). And TPC leaves out dependents and hence misses the tax savings for many younger workers. Tax units are similar to both families and households but not the same as either.
So here’s the bottom line (or lines):
- Nearly 160 million workers will take home an average of $714 more during 2012.
- About 122 million tax units will save an average of $924 in payroll taxes.
Only above-average workers will get the $1,000 repeatedly promised in the media.