Since Mitt Romney revealed his 13.9 percent tax rate this week, attention has been focused on the preferential tax treatment of money made from investments and capital gains rather than wages and earnings, which lets many wealthy Americans pay lower taxes than middle class families. In the State of the Union address this week, President Obama called a minimum tax for millionaires in order to do away with this problem.
As the New York Times noted today, however, plans to raise tax rates are unlikely to move through Congress before the 2012 elections. What that conventional wisdom ignores, however, is that Congress doesn’t have to do anything to raise the tax rate on capital gains. Doing absolutely nothing, in fact, would raise Romney’s taxes by a significant amount.
This is because the Bush tax cuts for the wealthy are scheduled to expire January 1, 2013, bumping the capital gains tax back to 20 percent. An obscure provision that limits deductions for high-income earners is set to return on the same day. The Affordable Care Act also enacted a tax on high-income taxpayers that will raise the rate on capital gains. Those changes require no Congressional action — rather, they require Congressional inaction — and would raise the capital gains rate significantly, as the Tax Policy Center pointed out:
Put it all together, and the top tax rate on capital gains is scheduled to increase from 15% today to 25% on January 1.
Romney, meanwhile, would ask Congress to pass a tax cut that would cut his tax bill by millions of dollars. As ThinkProgress has noted, Congress could actually wipe out most of the country’s deficit by doing nothing.