Republican presidential candidate Mitt Romney is filling in the blanks in his proposal to eliminate taxes on interest and dividends for families earning less than $200,000 a year.
A former business executive and Massachusetts governor, Romney said the plan would benefit 95 percent of American families — 56 million that earned interest in 2005, 28 million that earned dividends and 23 million with capital gains from real estate, stocks or bonds.
Romney, who previously has talked about his desire to eliminate such taxes, said the plan would encourage saving. He was explaining the details during an appearance Friday in New Hampshire.
“You’re creating a dramatic new incentive to save, which is savings will be tax free. ... Your interest, dividends and capital gains will be tax-free, which will allow people to establish pretty substantial nest eggs,” said Romney, who previewed his speech in a telephone interview Thursday with The Associated Press.
“Any tax reduction means more money in our pockets to invest in our country, and tax reductions stimulate our economy in general,” he said.
Cost: $32 billion
Romney spokesman Eric Fehrnstrom said the proposal would cost $32 billion, to be paid for through economic growth, and by holding non-defense discretionary spending to inflation minus 1 percentage point.
Romney has focused on economic issues during the campaign and especially in New Hampshire, where anti-tax sentiment has kept away a statewide income tax.
Earlier this year, he proposed restoring the three-fifths majority requirement for Congress to raise taxes, and he routinely pledges to fight new taxes. He said the new proposal would further help taxpayers.
“It’s a dramatic simplification of the tax process because you’re not going to have to worry about the basis of each asset and how long you held it and so forth. So you simplify taxes,” Romney said. “Most importantly, you let people save, and save for whatever purpose they like.”
Romney said the plan would “help middle class folks save for retirement, for homes, for anything they like — and to stimulate economic investment and growth.”
With the mortgage industry facing serious troubles and borrowers finding it harder to get loans, more savings would help, he said.
Romney said the proposal grew out of a a mealtime conversation with his sons, when he asked how many of them were saving for retirement through a 401(k) or a Roth IRA.
“I looked around the table and no one’s hand went up. It’s like, ’Why don’t you have these things?”’ he said.
He said the government makes saving difficult by threatening people with financial penalties for tapping their retirement accounts before they turn 65. He said his plan will help people save “without having to sign up for these nanny accounts.”
Romney, a multimillionaire venture capitalist, said the plan would not help people like him.
“There may be some tax policies which tend to favor the highest tax payers. This is certainly not one of them,” he said. “It is entirely targeted at middle-income and modest-income Americans, allowing the great bulk of our citizens — 95 percent of our citizens — to be able to save their income, tax free,” he said.
Romney’s top rivals also have weighed in on tax policy.
Former New York Mayor Rudy Giuliani has pledged to kill the so-called “marriage penalty” and “death tax.” Arizona Sen. John McCain has spoken in support of President Bush’s tax cuts. He also supported requiring a three-fifths majority vote for Congress to raise taxes, repealing the alternative minimum tax and flattening the tax structure.
By contrast, Democratic candidate John Edwards has proposed raising capital gains rates on families making more than $250,000 a year to 28 percent. He would tax dividends at 39.6 percent, the rate during the Clinton administration.