WASHINGTON -- The tax plan by GOP presidential hopeful Newt Gingrich would provide big tax breaks to the rich and blow a huge hole in the federal budget deficit, according to an independent study released Monday.
The analysis by the Tax Policy Center said households making more than $1 million a year would see their taxes drop by an average of 62 percent. Overall, federal tax revenues would drop by an estimated $850 billion in 2015, a figure that would dramatically worsen the budget deficit unless it is offset by unprecedented spending cuts, the study said. "The revenue losses are enormous," said Roberton Williams, a senior fellow at the Tax Policy Center.
Gingrich proposes an optional 15 percent flat tax on income. Under the plan, taxpayers could stay in the current system, which has a top tax rate of 35 percent on taxable income above $379,150, or switch to the new 15 percent tax. The new tax would apply to income at all levels, but there would be a variety of tax deductions and credits.
Gingrich would eliminate taxes on capital gains, dividends and interest, and reduce the corporate income tax rate from 35 percent to 12.5 percent. The plan would provide a personal deduction of $12,000 for every American, while maintaining the $1,000 per-child tax credit and the Earned Income Tax Credit, which benefits low-income people. Deductions for mortgage interest and charitable gifts also would be maintained.
Gingrich campaign spokesman R.C. Hammond disputed the projections on the budget deficit, saying the study doesn't account for the economic and job growth that such a tax system would generate.
The campaign's website said a new flat tax would make it easy for families to file their returns while eliminating taxes that discourage investment. "An optional flat tax reform will be simple: Tax returns can be done on one sheet of paper," the website says. "Subtract from income a standard deduction and deductions for charity and home ownership, multiply the result by the fixed, single rate of taxation of at most 15 percent, and the process is over."