Following the Iowa Presidential Caucus in early January, 2012 where only 8 votes separated candidates Mitt Romney and Rick Santorum, we thought it would be a good idea to compare their proposed tax plans. We wanted to get very specific, though. So, before we delved into the details of either plan, we created four hypothetical taxpayers:
The next step was to determine typical income and deductions for these hypothetical taxpayers. In our opinion, the following are typical for these taxpayers:
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 |
Now, we dove into the details of each tax plan. We intentionally delayed this step until we determined the hypothetical taxpayers’ profile and the typical income and deductions, as we did not want the details of the tax plans to influence this determination. Here are the results:
2011 Rates |
Romney |
Santorum |
||
Single Parent: | ||||
Federal Taxes Paid |
$0 |
$0 |
$0 |
|
Federal Taxes Refunded* |
$5,270 |
$4,631 |
$5,943 |
|
Family: | ||||
Federal Taxes Paid |
$9,469 |
$9,294 |
$5,616 |
|
Executive: | ||||
Federal Taxes Paid |
$402,147 |
$402,147 |
$331,864 |
|
Retired: | ||||
Federal Taxes Paid |
$3,594 |
$1,801 |
$3,063 |
|
* A refund would be realized due to the Refundable Earned Income Tax Credit and the Refundable Child Tax Credit |
A few very important notes:
Now some analysis:
Santorum’s plan’s results in lower taxes or a higher refund (due to the refundable earned income and child tax credits) in three of the four scenarios.
If you want to review our backup information, including tax returns for each of these scenarios, please email us at [email protected].
Three days prior to publishing this report, we sent this paper and our backup notes to the Romney and Santorum campaigns for their feedback. We received no feedback.
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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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