Comparison of Obama and Romney Tax Proposals

The table below provides a quick comparison of the tax proposals presented by Barack Obama and Mitt Romney. The table is drawn from a writeup in the Oct. 12 Kiplinger Letter, which cautions, “Neither candidate’s package will fly. Both plans fall short on raising revenue to help trim the federal deficit. And neither accounts for the political realities of a closely divided Congress.”

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Let me know your thoughts about what you see below.

Taxation areaObamaRomney

Individual ratesRaise tax rates on incomes above $200,000 ($250,000 for joint filers). Top rates would go from 33 percent to 35 percent and from 35 percent to 39.6 percent.Would cut by 20 percent. The highest would go from 35 percent to 28 percent; the lowest would go from 10 percent to 8 percent.

Capital gainsRaise the top rate paid by upper-incomers to 20 percent; leave the maximum at 15 percent for everyone else.Eliminate taxes on capital gains except for high-incomers, who would continue to pay 15 percent.

Dividend incomeTax as ordinary income for the wealthy. No change for everyone else.Treat it the same as capital gains (see above)

Municipal bond interestObama would limit tax-free status for upper-incomers. (Same is true for employer-provided health care.)Romney is thinking about ending its tax-free status.

Deductions and write-offsFocused on changes for high-income individuals and families. Would reinstate a provision that lapsed in 2009 that would pare deductions by 3 percent of the amount by which filers' adjusted gross incomes exceed $200,000 ($250,000 for joint filers). Would not touch their deductions for medical expenses, casualty losses and investment interest paid. Would cap the value of all their deductions plus write-offs such as college tuition, student loan interest, self-employed health insurance and pay-ins to retirement and health savings accounts.Limit all taxpayers' deductions, including those for home mortgages and charitable donations. The suggested cap is $17,000, but he has said there is room to raise it higher. The tradeoff? The higher the ceiling on deductions or the bigger the exemptions to the ceiling, the smaller the tax rate cuts can be. (To maintain needed revenue, it will probably be impossible to cut rates as much as he proposes without drastically slashing deductions, and not just for high-incomers.

Estate taxes and alternative minimum taxFavors a lower exemption and higher rates than the current estate tax. Would set a higher threshold for alternative minimum tax so middle-incomers aren't hit.Eliminate both altogether.

Business taxesCut the top corporate rate to 28 percent. Make the research and development credit permanent. Raise the current 9 percent domestic production credit to 10.7 percent and even more for those using advanced processes. Small companies could expense up to $1 million a year in asset purchases. The $5 million ceiling on using the cash method of accounting would be doubled.Cut the top corporate rate to 25 percent. Eliminate the corporate minimum tax. Make the research and development credit permanent.

Foreign subsidiariesWants to impose a minimum tax on them.Would tax only income that is earned within U.S. borders.

Other proposalsWould get rid of the domestic production deduction for nonmanufacturers. Would eliminate use of two accounting practices - last-in, first-out inventory and the lower-of-cost-or-market method. Would eliminate deductibility of interest on corporate debt. Lengthen depreciation schedules for many assets.Hasn't detailed which business breaks he would eliminate, but said that cuts would be made to offset the tax rate reductions he proposes.