The simplest way to conceive of Mitt Romney's tax proposal is the Bush Tax Cuts on steroids. It's not sweeping tax reform. The rates don't change. The deductions stay put. Instead, it's a time machine back to 2008 ... with a big pair of scissors to make some additional cuts.
The GOP frontrunner would permanently extend the Bush/Obama tax cuts in addition to eliminating both the estate tax and the tax on capital gains for "non-rich" families. He would not extend the majority of the tax cuts and tax hikes passed in the Obama administration.
This is Mitt Romney's tax plan in five steps, as analyzed by nonpartisan Tax Policy Center:
1) Permanently extend the Bush/Obama tax cuts
2) Cancel almost all the tax breaks passed under Obama, including: the American Opportunity tax credit for higher education, the expanded refundability of the child credit, and the expansion of the earned income tax credit, and the surtaxes on high-income individuals imposed by Obamacare
3) Eliminate tax on long-term capital gains, dividends, and interest income for households under $200,000
4) Repeal the federal estate tax, while continuing the gift tax with a maximum tax rate of 35 percent.
5) Reduce the corporate income tax rate from 35 to 25 percent and make the research and experimentation credit permanent
For a family making less than $10,000 a year, the average tax bill would go up by $112. For a family making more than $1,000,000 a year, the average tax bill would go down by about $145,000.
This is Romney's effect on after-tax incomes across all income groups (positive numbers reflect after-tax gains as a share of income, while negative numbers reflect a tax increase). All numbers along the X-axis are in thousands of dollars.
One word of caution about this graph. Looking at average after-tax income as a percentage is probably the fairest way to judge a tax plan's effect on households. But Romney's plan has a surprising amount of variability within these brackets. Take, for example, the families making less than $10,000 a year. About 11 percent of them would get a tax cut, 17 percent would get a tax increase as high as $700, and 75 percent would see practically no change. So while the average tax hike comes out to $112 (or 1.9 percent of their income), that disguises the fact that most low-earners wouldn't see their taxes change significantly. On the other hand, more than 90 percent of families making more than $200,000 would get a tax cut worth thousands of dollars.
What's behind the numbers? The most important tax change for lower income families is Romney's repealing the expanded child credit and earned income tax credit. For richer families, the permanent extension of the 2001/2003 tax cuts and the repeal of Obamacare and its taxes are helping to bring down their tax burden.
Update: Romney's tax proposal would make the tax code slightly more regressive. But it's nothing compared to some other GOP proposals. Via Ezra Klein, here's the tax change for the top 1% in various candidates' plans.
Update II: The Romney camp emailed to dispute the idea that eliminating temporary tax provisions amounts to a tax hike. They have a case. TPC makes a judgment call when they predict future tax policy. In this analysis, they predict that Obama will extend his stimulus-act tax cuts. So Romney's plan only raises taxes against what TPC thinks will be Obama's policy.