Gingrich tax ‘plan’ starves government, feeds the wealthy, rests on flawed assumptions
Angry Bear Blog|Dec. 14, 2011, 8:41 AM|55|1
by Linda Beale
In case you hadn’t heard about it, Gingrich would offer taxpayers a choice to pay tax under current policy or at a 15% rate, with zero taxation of capital gains, dividends and interest that accrues mostly to the rich and uberrich, while corporate tax rate would be reduced to a mere 12.5%.
For the rich, the 15% rate on their ordinary income and the 0% rate on their predominant form of income (capital gains and income from capital) would be a windfall. For corporations, it would practically amount to the elimination of the corporate tax.
It should be no surprise that tax revenues would decline substantially: the Tax Policy Center study of Gingrich’s plan estimates by $1.3 trillion over a decade.
While the lower two quintiles would get an average tax cut of about $440, the top 1% (starting at incomes of about $629,000) would get an average $344,000 cut and the top 0.1% (starting at incomes of about 2.868 million) an average $1.9 million cut.
See also Study: Gingrich Plan would provide big breaks for rich, blow huge hole in budget deficit, Washington Post (December 12, 2011); Rubin et al, Gingrich Plan to Add $1.3 trillion to Deficit, Study Finds, Bloomberg (Dec. 12, 2011). In addtion, anyone owing any money to Tiffanys would receive an automatic refund in diamonds that are tax deductable.
We may be skating on very thin ice here, but the weight of the evidence still supports a weak bull case for the near to intermediate term. So I’m adding buy picks on the chart pick list and adjusting trailing stops to account for the risk.
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