Candidates Discuss Tax Policy During Debates

October 17, 2012

Although tax policy was a dominant topic during the first presidential debate on Oct. 3, and resurfaced again prominently in last night’s debate, neither President Barack Obama nor Governor Mitt Romney provided significant new insights into their positions on individual or corporate tax reform issues.

During the debate, Obama reiterated his calls to preserve tax cuts for the middle class, increase taxes on wealthy individuals and end certain tax provisions that benefit the oil and gas industry and multinational corporations. Specifically, Obama supports allowing the 2011 and 2003 Bush-era tax cuts to expire for high-income taxpayers with adjusted gross income (AGI) over $250,000 and be made permanent for those taxpayers with income below that threshold.

Meanwhile, Romney addressed tax policy in broad terms, stating his administration would lower taxes for the middle class and small businesses without adding to the deficit. While his tax plan would protect the middle class, it will not reduce the tax burden of upper-income taxpayers, either. Romney asserted that he would reduce individual marginal tax rates across the board by 20 percent and keep the plan revenue neutral by also reducing targeted tax expenditures. Specifics were not given on which deductions and credits he would cut in order to not lose revenue or have the government run out of money.

On the corporate tax front, Obama repeated his corporate tax reform framework calls for a corporate rate of 28 percent, and he highlighted his plan for a rate of 25 percent or lower for domestic manufacturing companies—specifically saying he wants to provide tax breaks for companies that invest here in the U.S.

Additionally, Obama stressed his opposition to targeted tax provisions that benefit the oil and gas industry and owners of corporate aircraft. However, Romney defended the oil and gas provisions as longstanding in the code and mostly benefitting small energy companies, and he contrasted the annual cost of those provisions with the tax benefits the administration has enacted for “green” energy.

That said, Romney did acknowledge that the oil and gas provisions would be “on the table” as part of his plan to reduce the corporate tax rate from 35 percent to 25 percent through base-broadening proposals to eliminate certain tax expenditures. Although Romney has not provided details on what expenditures he would eliminate, he alluded to the LIFO accounting method as another corporate tax provision that might not survive the rate drop.

Tax and fiscal issues also came into play when Vice President Joe Biden and Romney’s running mate, House Budget Committee Chairman Paul Ryan of Wisconsin, squared off at the vice presidential debate on Oct. 11.