According to many polls, former House Speaker Newt Gingrich is now leading the Republican pack. His plan to rewrite the nation's tax policy hasn't gotten as much attention as some of his other proposals, but, according to a new analysis, it would require sweeping changes to the government.
Gingrich proposes a two-tier plan: taxpayers can either stick with the current system, or they can opt for his new 15 percent flat tax on income. There would be fewer write-offs, though deductions for mortgage interest and charitable contributions as well as the child tax credit would stay.
Corporations would pay an even lower rate, and many forms of income wouldn't be taxed at all.
"I would start with zero capital gains, hundreds of billions of dollars would pour into the country; I'd go to 12.5 percent corporate tax rate, that would bring in at least $700 billion in repatriated money back from overseas," Gingrich said at the debate hosted by ABC on Saturday night. "I would then go to 100 percent expensing for all new equipment ... and I'd abolish the death tax permanently. Those steps would begin to dramatically create jobs."
The non-partisan Tax Policy Center found that under this plan, 70 percent of Americans would see their taxes go down.
"No losers. Everyone would be at least as well off as they are now," says Roberton Williams, a senior fellow at the Center, which has also examined the tax plans of Herman Cain and Rick Perry.
Of course, if no one would see their taxes rise and millions would see their taxes fall, Williams says something has got to give.
"Newt Gingrich's tax plan would lose a lot of revenue, and give most of the benefits to very wealthy individuals," he says.
The wealthy would benefit the most because the top tax rate would drop from 35 percent where it is now, to 15 percent. Those who get much of their income from capital gains, interest and dividends would see their taxes fall even further.
Williams says if you compare the Gingrich plan to current law, which would see the Bush era tax cuts expire at the end of next year, the Gingrich plan would lose about $1.3 trillion of revenues in one year.
Just to put that in perspective, the congressional supercommittee was charged with finding $1.2 trillion in deficit savings over 10 years and came up short. Under Gingrich, Williams says that much would have to be cut from government spending in a single year — or that amount added to the deficit.
"Spending cuts would be enormous," he says.
The Gingrich campaign says the Tax Policy Center analysis is way off.
"We don't recognize them as the sheriff on these issues," says Peter Ferrara, an economic policy adviser to the Gingrich campaign. He says the Tax Policy Center came to the campaign looking for additional details as it prepared its analysis.
"We didn't respond to them so they made up their own details," he says. "So what they scored was their plan, but it was not our plan. And the biggest fallacy of it was it didn't take into account economic growth effects."
The Center readily admits it had to fill in some blanks. Ferrara wouldn't say which, if any, assumptions the analysis got wrong, but he says within a few weeks the Gingrich campaign will release an independent scoring of its own.