Daily Tax Update - October 17, 2012: Obama, Romney Face Off in Town Hall Meeting

OBAMA, ROMNEY FACE OFF IN TOWN HALL MEETING: Last night, President Obama and former Massachusetts governor Mitt Romney met in a town hall debate moderated by Candy Crowley.

  • One of the questions posed by an audience member was, "Governor Romney, you have stated that if you're elected president, you would plan to reduce the tax rates for all the tax brackets and that you would work with the Congress to eliminate some deductions in order to make up for the loss in revenue. . . What would be your position on those things, which are important to the middle class?"
  • Romney responded, "And — and let me tell you, you — you're absolutely right about part of that, which is I want to bring the rates down, I want to simplify the tax code, and I want to get middle-income taxpayers to have lower taxes.  And — and the reason I want middle-income taxpayers to have lower taxes is because middle-income taxpayers have been buried over the past four years. You've seen, as middle-income people in this country, incomes go down $4,300 a family even as gasoline prices have gone up $2,000. Health insurance premiums — up $2,500. Food prices up, utility prices up. The middle-income families in America have been crushed over the last four years. So I want to get some relief to middle-income families. That's part — that's part one."
    • Romney continued, "Now, how about deductions? Because I'm going to bring rates down across the board for everybody, but I'm going to limit deductions and exemptions and credits, particularly for people at the high end, because I am not going to have people at the high end pay less than they're paying now. The top 5% of taxpayers will continue to pay 60% of the income tax the nation collects. So that'll stay the same. Middle-income people are going to get a tax break. And so in terms of bringing down deductions, one way of doing that would be to say everybody gets — I'll pick a number — $25,000 of deductions and credits. And you can decide which ones to use, your home mortgage interest deduction, charity, child tax credit and so forth. You can use those as part of filling that bucket, if you will, of deductions. But your rate comes down, and the burden also comes down on you for one more reason. And that is every middle-income taxpayer no longer will pay any tax on interest, dividends or capital gains, no tax on your savings. That makes life a lot easier. If you're getting interest from a bank, if you're getting a statement from a mutual fund or any other kind of investments you have, you don't have to worry about filing taxes on that, because there will be no taxes for anybody making $200,000 a year and less on your interest, dividends and capital gains."
  • Obama responded, "My philosophy on taxes has been simple, and that is, I want to give middle-class families, and folks who are striving to get in the middle class, some relief, because they have been hit hard over the last decade, over the last 15, over the last 20 years. So four years ago I stood on a stage just like this one — actually, it was a town hall — and I said I would cut taxes for middle-class families, and that's what I've done by $3,600. I said I would cut taxes for small businesses, who are the drivers and engines of growth, and we've cut them 18 times. And I want to continue those tax cuts for middle-class families and for small businesses. But what I've also said is if we're serious about reducing the deficit, if this is genuinely a moral obligation to the next generation, then in addition to some tough spending cuts, we've also got to make sure that the wealthy do a little bit more. So what I've said is your first $250,000 worth of income, no change. And that means 98% of American families, 97% of small businesses, they will not see a tax increase. I'm ready to sign that bill right now. The only reason it's not happening is because Governor Romney's allies in Congress have held the 98% hostage because they want tax breaks for the top 2%. But what I've also said is for above 250,000 (dollars), we can go back to the tax rates we had when Bill Clinton was president, we created 23 million new jobs. That's part of what took us from deficits to surplus. It will be good for our economy, and it will be good for job creation."
    • Obama added, "Now, Governor Romney has a different philosophy. He was on "60 Minutes" just two weeks ago, and he was asked, is it fair for somebody like you, making $20 million a year, to pay a lower tax rate than a nurse or a bus driver, somebody making $50,000 a year? And he said, yes, I think that's fair. Not only that, he said, I think that's what grows the economy. Well, I fundamentally disagree with that. I think what grows the economy is when you get that tax credit that we put in place for your kids going to college. I think that grows the economy. I think what grows the economy is when we make sure small businesses are getting a tax credit for hiring veterans who fought for our country. That grows our economy." 
    • Obama continued, "So we just have a different theory. And when Governor Romney stands here after a year of campaigning, when during a Republican primary, he stood onstage and said, I'm going to give tax cuts — he didn't say tax rate cuts; he said tax cuts — to everybody, including the top 1%, you should believe him, because that's been his history. And that's exactly the kind of top-down economics that is not going to work if we want a strong middle class and an economy that's thriving for everybody."
  • Ms. Crowley asked Obama a follow up question, "Let me ask the president something about what you just said. The governor says that he is not going to allow the top 5% — I believe is what he said — to have a tax cut, that it will all even out, that what he wants to do is give that tax cut to the middle class. Settled?"
  • Obama responded, "No, it's not settled.  Look, the cost of lowering rates for everybody across the board 20%, along with what he also wants to do in terms of eliminating the estate tax, along what he wants to do in terms of corporates changes in the tax code — it costs about $5 trillion. Governor Romney then also wants to spend $2 trillion on additional military programs, even though the military's not asking for them. That's $7 trillion. He also wants to continue the Bush tax cuts for the wealthiest Americans. That's another trillion dollars. That's $8 trillion. Now, what he says is he's going to make sure that this doesn't add to the deficit, and he's going to cut middle-class taxes. But when he's asked, how are you going to do it, which deductions, which loopholes are you going to close, he can't tell you. The — the fact that he only has to pay 14% on his taxes when a lot of you are paying much higher — you know, he's already taken that off the board. Capital gains are going to continue to be at a low rate, so we — we're not going to get money that way. We haven't heard from the governor any specifics, beyond Big Bird and eliminating funding for Planned Parenthood, in terms of how he pays for that. Now, Governor Romney was a very successful investor. If somebody came to you, Governor, with a plan that said, here; I want to spend 7 (trillion dollars) or $8 trillion, and then we're going to pay for it, but we can't tell you until maybe after the election how we're going to do it, you wouldn't have taken such a sketchy deal. And neither should you, the American people, because the math doesn't add up. And — and what's at stake here is one of two things. Either, Candy, this blows up the deficit — because keep in mind, this is just to pay for the additional spending that he's talking about, 7 (trillion dollars), $8 trillion. That's before we even get to the deficit we already have. Or alternatively, it's got to be paid for not only by closing deductions for wealthy individuals. That will pay for about 4% reduction in tax rates. You're going to be paying for it. You'll lose some deductions. And you can't buy this sales pitch. Nobody who's looked at it that's serious actually believes it adds up."
  • Crowley asked Romney, "And Governor, let's — before we get into a vast array of who said what — what study says what, if it shouldn't add up, if somehow when you get in there, there isn't enough tax revenue coming in, if somehow the numbers don't add up, would you be willing to look again at a 20% —"
  • Romney responded, "Well, of course they add up. I was — I was someone who ran businesses for 25 years and balanced the budget. I ran the Olympics and balanced the budget. I ran the — the state of Massachusetts as a governor, to the extent any governor does, and balanced the budget all four years. When we're talking about math that doesn't add up, how about $4 trillion of deficits over the last four years, 5 trillion (dollars). That's math that doesn't add up."
  • The transcript can be accessed here.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE: 
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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