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9 Facts about the Santorum Tax Plan

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Mitt Romney may have the eyes of the Republican party right now but there’s no doubt that the race is far from over. With little explanation, candidates like Herman Cain and Newt Gingrich have rocketed to the front of race only to be replaced by somebody else but Rick Santorum, a candidate largely in the shadows, is now getting a second look since his strong showing in Iowa.

The 2012 campaigns are all built around the economy and because of that, voters are first looking at candidates’ plans for shoring up a country with overwhelming debt, high unemployment, and struggling investment markets. If you haven’t heard about Santorum’s tax plan, here are nine important facts to get you started.

Only Two Tax Brackets

Santorum wants to simply the tax system by reducing the amount of tax brackets to only two: 10% and 28%. This leaves the lowest tax bracket intact but brings the tax rate for the now vilified 1% down as much as 7%.

Lower Capital Gains

The capital gains and dividend tax would be lowered from 15% to 12% in the hopes of spurring more investment in American markets and companies.

Raise Children Exemptions

By tripling the exemption for each child, Santorum wants more money to stay in American households instead of Washington. This part of the plan is aimed at lower and middle class Americans who are feeling the pinch of unemployment and lower wages.

Cut the Corporate Taxes

The United States has one of the highest corporate income taxes in the world causing American businesses to deposit foreign earned money in to foreign banks instead of bringing it back to America. Santorum wants to fix this by cutting the corporate tax rate in half from 35% to 17.5%. In addition, manufacturers would pay no income tax.

Increase R&D Tax Credit

Companies who are actively involved in research and development receive a 14% deduction on expenses related to producing new products and services. Santorum wants to increase that to 20% and make it a permanent deduction to increase American innovation.

No More AMT

The alternative minimum tax was not meant to punish middle income Americans but according to Santorum, it has. He proposes to eliminate the AMT to remove this complicated piece of the tax code.

No More Death Tax

The death tax, better known as the estate tax, is the tax paid on the transfer of assets from a deceased person. Without careful planning, the estate tax can greatly reduce the value of those assets but Santorum wants to eliminate the estate tax permanently.

No More Marriage Penalty

When some couples get married, they pay more taxes than if they filed separately as singles. Santorum wants to eliminate this penalty.

Retain Deductions

If he’s going to lower tax rates and simplify the tax code, removing the numerous deductions that allow some American families to have no tax liability would seem logical but he pledges to retain popular deductions like mortgage interest, charitable giving, and retirement savings.

The Problems

The problem, according to opponents, is the large amount of tax revenue that would be lost further ratcheting up America’s debt burden. The plan is friendly to low and middle income earners but especially beneficial to high net worth individuals and corporations, something that Americans are speaking out against thanks to campaigns like the Occupy movement and Democrats criticizing corporate jets and Wall Street profits.

No formal review of the plan has been conducted but if Santorum continues to rise in popularity, The Tax Policy Center or other organization will certainly crunch the numbers as they did with Cain’s 9-9-9 plan. What do you think of Santorum’s plan? Do you agree with what appears to be the consensus that it’s a good election year plan but may push America further in to debt?

{ 16 comments, please add your thoughts now! }

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16 Responses to “9 Facts about the Santorum Tax Plan”

  1. Heather says:

    When these very ambitious plans come out, I think that there is zero chance of getting it through congress. If they just focused on one ambitious component (like loosing AMT or at least indexing it to inflation) I’d think that they were serious about actually trying to negotiate to get it through.

  2. David R says:

    tripling the exemption for each child?

    Very very bad idea.

    In UK, there is a situation that one Arabian family has 10 kids and because of all the money they got for these kids, the parents are not working at all.

    And this is happening in US: blacks and latinos are having more kids to get more government money to raise these kids. The whole society is totally screwed.

    Thanks, Santorum.

    • Shirley says:

      TRIPLING the exemption for each child is totally unacceptable.

    • Deezer says:

      David, people are having kids in the US because they can get a big welfare check. Santorum is doing this to help families. He also is pro-welfare reform, and wants to get people that are “addicted” to entitlements help so they can get jobs and get off of welfare.

  3. Courtney says:

    Fact #1 is pretty meaningless without knowing how much income falls into each bracket. There’s a huge difference between a tax plan that taxes the first $17K at 10% and the rest at 28% (the current cutoff for the 10% bracket) and a tax plan that taxes the first $143K at 10% and the rest at 28% (the current cutoff for the 25% bracket).

  4. Kathryn C says:

    Great summary.
    He isn’t thinking big picture, this is for his election campaign. None of this would go through congress, and the biggest question, as you say, how would he plug the rev shortfall. I give it a thumbs down all around.

    • Strebkr says:

      Idiots will vote for him. Stunts like this get attention, even though there is no way it would be financially feasible.

      • Deezer says:

        I disagree. Lower business taxes will cause a massive movement of industry into the USA. More industry = more corporate tax = more income tax.

        Also, Rick Santorum also is against entitlement programs and for a balanced budget amendment – he is committed to getting rid of our debt.

  5. Karen says:

    Critics who say these tax cuts rob the government coffers did not live during the Reagan tax cuts, or did not pay attention. They put money back into the economy, where it belongs. As the economy grows, then the tax base grows, revenues are raised. No, it’s not instant, but it is the only way to grow the economy. If this ambitious tax plan were to ever see the light of day, it would only be with a new Congress. (sounds good to me:)

    Thanks for posting this synopsis. Now I like Santorum even more. He seems to be the only true fiscal conservative running.

    • Deezer says:

      Karen, I totally agree.

      These are pro-growth tax policies, which flood the economy with money in people’s pockets, encourage industry to come to the US and pay taxes in the US.

      The alternative is to keep increasing taxes, driving more industry (jobs) away from the USA, reducing income tax, reducing corporate tax, killing our country (especially since the government has massive entitlement programs)

  6. Brad says:

    While its true Reagan’s tax cut did benefit the economy, he also doubled the national debt. To David R. please get your facts straight before spouting such non-sense. Whites are still in the majority and benefit from the EIC(earned income credit) and would benefit as much if not more than minorities. Also the EIC is limited in the number of children you can claim to four. So having more than four kids won’t do you any good. The problem with Santourum’s tax, is they raise the national debt before the economy recovers and more revenue is generated.

    • Karen says:

      The democratically controlled Congress doubled the debt. One of the unfortunate consequences of the Compromises Reagan had to agree to to get the tax cuts he wanted. Now he get’s the credit for the debt. Politics is a bitch, isn’t it?:)

  7. Deezer says:

    Tax cuts produce growth.

    Growth produces tax revenues.

    Reasonable tax rates avoid people dodging the tax system (i.e. incorporating in the Cayman Islands).

    With this tax plan, we would see incredible growth in the economy because businesses would be attracted to build and invest in the US (with low corporate tax rates) and people would have more money in their pocket to spend. Also people would have an incentive to invest with lower capital gains tax, no death tax, etc.

    Also, keep in mind that Santorum is in favor of a balanced budget amendment – he would cut spending and balance the budget, so even if there was a short-term dip in revenues, he would cut likewise.

    Lastly, I like this tax plan because it removes the penalties for marriage & helps those who have children. Families are the foundation of our society and we should continue to encourage the health and wellness of the family so that our society can continue to prosper.

    • Karen says:

      Deezer, you pinpointed the problem with the argument that tax cuts will not help the debt… the tax cuts MUST be accompanied with a cutback in government spending. To think that we can get ourselves out of debt with higher taxes is ludicrous.

  8. Mary Agnes Fine says:

    I spent 37 years in the tax business. Don’t agree with his stance on tax brackets. Range between 10% and 28% is much too broad. If we’re going to keep the same old same-o with all the deductions, etc. we need to stay with current tax brackets. Personally, I would like to see deductions, i. e. interest, contributions, etc. eliminated with a simpler system. The cost of administering a system with all these deductions is stupendous.


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