UPDATE: Tax Plan Square Off: Romney vs. Santorum vs. Gingrich

After we published our blog on the Romney vs. Santorum tax plans, we were inundated with requests to add the Gingrich tax plan to the analysis.  So, below is an updated chart that includes the results of the Gingrich tax plan.  Our methodology remained the same, using the hypothetical taxpayers and the typical income and deductions.

The following are the hypothetical taxpayers and the typical income and deductions:

Single Parent

Family

Executive

Retired

Filing Status

Head of Household

Married-File Jointly

Married-File Jointly

Married-File Jointly

Marital Status

Single/Divorced

Married

Married

Married

Dependent Children

3

3

3

0

Homeowner or Renter

Renter

Homeowner

Homeowner

Homeowner

W-2 Earnings – Parent One

$30,000

$85,000

$1,250,000

$0

W-2 Earnings – Parent Two

N/A

$35,000

$0

$0

Pension Income-Both   Spouses

N/A

N/A

N/A

$30,000

Social Security   Income-Both Spouses

N/A

N/A

N/A

$35,000

Interest Income

$0

$500

$10,000

$6,000

Dividend Income

$0

$0

$15,000

$1,000

Capital Gain Income

$0

$0

$250,000

$0

Mortgage Interest Paid

$0

$15,000

$40,000

$0

Charitable Donations Made

$0

$750

$10,000

$500

Real Estate Taxes Paid

$0

$4,000

$25,000

$2,500

State Income Taxes Paid

$900

$3,600

$45,000

$1,000

The following are the results:

2011 Rates

Romney

Santorum

Gingrich

Single Parent:
Federal Taxes Paid

$0

$0

$0

$0

Federal Taxes Refunded*

$5,270

$4,631

$5,943

$5,270

Family:
Federal Taxes Paid

$9,469

$9,294

$5,616

$6,638

Executive:
Federal Taxes Paid

$402,147

$402,147

$331,864

$171,000

Retired:
Federal Taxes Paid

$3,594

$1,801

$3,063

$3,594

* A refund would be realized due to the Refundable Earned   Income Tax Credit and the Refundable Child Tax Credit

 

Some notes about this Update (these are in addition to the notes in the Romney vs. Santorum blog):

  • The Gingrich tax plan gives taxpayers a choice between paying taxes under the current tax system or paying tax at the single 15% tax rate.  The amounts on the chart above are the lesser of the Gingrich plan or the current tax system.
  • The Gingrich 15% tax rate would allow some deductions and would not include Capital Gain, Interest or Dividend Income.  The deductions allowed would be Mortgage Interest, Charitable Contributions and a $12,000 personal exemption for each individual and dependent.
  • Gingrich would retain the expanded Earned Income and Child Tax credits.  We assumed these would be retained at the 2012 levels.
  • We assumed that Social Security income would be taxed at 100% under the Gingrich 15% plan.

 

Now some analysis (this is in addition to the analysis in the Romney vs. Santorum blog):

  • The biggest, most obvious difference between the Gingrich plan and all the other plans, is the amount of taxes high-earners will pay under the Gingrich plan.  In our example, none of the Capital Gain, Interest and Dividend income will be taxed and the salary ($1,250,000) is only taxed at 15% for the Executive.  It results in about a 50% reduction or $160,000 less in taxes than the Santorum plan.  Even if we assumed that Capital Gain, Interest and Dividend income would be taxed under the Gingrich plan, it would still result in a 35% reduction or $120,000 less in taxes than the Santorum plan.
  • Both Santorum’s and Gingrich’s plan would result in substantial savings for the Family, also.  The Gingrich plan would give a $12,000 personal exemption for each individual and dependent.  The results for families with one or fewer children would be very different, though (our example assumes three children).  For example, assuming the same income and deductions for the Family, but having only one child, would actually result in higher taxes under the Gingrich alternative method (but according to his plan, you would be able to select the lower tax calculated under the current tax system).

If you want to review our backup information, including tax returns for each of these scenarios, please email us at info@accountalent.com.

Prior to publishing this blog, we sent it to the Gingrich campaign for their comments, but did not hear back from them.

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IRS Circular 230 Disclosure

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

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  • http://www.clickandinc.com/blog Sarah Kolb

    Thanks so much for the calculations and hard work! Between the exaggerated numbers being bandied around and the ridiculous rhetoric, I find myself getting lost trying to follow what these things might actually mean to real people. Thanks!!