After the recent attention directed at Republican Presidential candidate Mitt Romney’s tax bill, Alabamans may be curious to see the impact of the various Republican’s tax plans, especially for those who are lucky enough to share Romney’s tax bracket. Time Magazine ran the numbers and found that under his own plan, Romney would save $3.4 million a year given his $22 million income in 2010.
Romney’s own plan would reduce his tax bill thanks largely to his proposal to permanently lower the tax on investment income to 15%. The vast majority of Romney’s income (and that of many wealthy individuals) is derived from such investments and explains why he’s able to keep his overall tax rate so shockingly low. Currently, taxes on investment income are set to rise in 2013 to nearly 39.6% on the wealthiest taxpayers, unless action is taken to keep rates in place. Capital gains rates are also set to jump up to 20%, but if Romney wins and they remain at 15%, Romney should save some $2.6 million each year.
Romney’s plan would also do away with a planned 3.8% tax on investment income on wealthy Americans set to go into effect next year to offset the costs of health care reform. This would save Romney approximately $800,000 a year. Romney intends to lower the corporate tax rate to 25% from 35%; such a drop would increase his pre-tax income by $300,000.
All of these changes though are small potatoes compared to his most impactful proposal: killing the estate tax. The current scheme says that in 2013 Americans will be permitted to pass $1 million tax-free to their heirs. Any money beyond that would be taxed at 50%. Romney’s idea is to eliminate the estate tax (or “death tax,” as Republican’s have dubbed it) completely. Such a move would save Romney’s family, based on his estimated net worth of $260 million, as much as $130 million when he dies.
Gingrich’s plan would call for a complete elimination of taxes on stock dividends and capital gains. Corporate tax rates would be slashed even further, down to 12.5%. Gingrich also wants to repeal the estate tax and the new health care tax. The result: Romney’s tax bill would drop from an estimated $6.4 million in 2013 to just $75,000.
Santorum’s tax plan would lower investment income taxes farther than Romney, but not quite so low as Gingrich. Under Santorum’s plan, investment income would be taxed at 12%. Like the others, Santorum would also get rid of the estate tax, the new health care tax and the alternative minimum tax. Corporate taxes would fall to 17.5% for most companies, but would be eliminated completely for manufacturers. All in, Romney’s tax bill in 2013 under Santorum would come to $2.5 million, a steal compared to President Obama’s.
It’s not all bad news under Obama. His plan would keep stock dividends tax rate at 20% rather than let them rise to 39.6% in 2013. Capital gains taxes and income tax rates would increase as scheduled. Most importantly, the estate tax would come to 35% for all inherited income above $3.5 million. Adding in everything, under President Obama’s plan Romney would pay a total tax bill of just over $6.9 million in 2013. As such, don’t be surprised if you don’t see him campaigning too hard for the President should he lose the nomination battle.
Estate planning is a tricky business and one that requires attorneys stay up-to-date with the latest news. The skilled Alabama estate-planning attorneys at Martinson & Beason will provide you with the highest quality work and ensure your family’s financial future remains secure even after you’re gone. Please do not hesitate to contact Martinson & Beason if you find yourself needing the assistance of an experienced Huntsville estate planning lawyer.