When Newt Gingrich proposed his 15 percent flat-tax scheme in October, the plan like the former House Speaker himself was viewed as an afterthought in the GOP presidential race. But now that Gingrich is the new Republican frontrunner, his tax cut proposal is finally getting the scrutiny it deserves. Because like fellow flat-taxers Herman Cain and Rick Perry, Newt Gingrich would deliver yet another windfall for the wealthy while piling up mountains of new debt.
Gingrich's plan resembles Perry's in many respects. Under Newt's proposal, taxpayers could choose to pay at an optional 15 percent flat tax rate, compared to Perry's 20 percent. The corporate tax rate would be slashed from 35 percent to 12.5 percent. Like, Perry, Gingrich would eliminate the capital gains tax altogether. (As the Washington Post recently explained the impact of the already historically low 15% capital gains tax rate, "Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.")But as Suzy Khimm documented in the Washington Post, Gingrich's plan would produce an ever larger payday for the upper class than Rick Perry, while ensuring Treasury hemorrhages even more red ink:
Gingrich preserves deductions for corporations and rich individuals that Perry eliminates: He preserve deductions for charitable giving and mortgage interest to all Americans, whereas Perry only keeps them for families earning less than $500,000. Perry vows to eliminate all corporate tax deductions, while Gingrich would preserve them. As such, corporations and the richest Americans could stand to benefit even more under Gingrich's plan than Perry's.
Under Perry's plan, those with more than a million in income would save $500,000 in taxes by 2015, due to a 60 percent drop in their tax rate, and those benefits would be even bigger under Gingrich. According to the Tax Policy Center, Perry's plan would lower total projected government revenue by 27 percent--a $1 trillion loss in 2015 alone. Gingrich's plan, accordingly, would result in even bigger revenue loss.
Roberton Williams of the Tax Policy Centerconcurred with that assessment, concluding, "You would have about three-quarters of the revenue you would have under Perry, so you have a much bigger revenue hole."
(Left out of that deficit picture is Gingrich's plan to privatize Social Security. By allowing younger workers to contribute a portion of their payrolls taxes to private accounts, Gingrich would necessarily rob the Social Security system of trillions needed to pay current beneficiaries. Worse still, by putting Uncle Sam on the hook for accounts that don't perform as well as the current system, Gingrich would guarantee bailouts for bad investors.)
In Gingrich's defense, his program would not wallop working Americans as much as Perry and Cain. Even though 15 percent is higher than the 10 percent rate lower income Americans currently pay, "Gingrich also preserves more of the exemptions, deductions and tax loopholes for individuals than Perry does," including the child tax credit, the Earned Income Tax Credit, and the deduction for purchasing health insurance. Nevertheless, with his cornucopia for the gilded class, Gingrich's plan is, TPC's Williams concluded, "very regressive."
Which is great news for America's wealthy, including Newt Gingrich. Under President Gingrich, Newt could keep more of his millions away from the United States Treasury and put it where he believes it belongs: Tiffany's.
(For more background, see comparisons of the Republican candidates' tax plans at the Washington Post, McClatchy and the Christian Science Monitor. For their stunnning impact on America's record income inequality, see "The GOP's Off-the-Charts Tax Cut Windfalls for the Wealthy.")