The candidates' positions on tax reform.

• Author: Lapsevic, Karen
• Position: WASHINGTON BEAT

In his campaign document, Believe in America: Mitt Romney's Plan for Jobs and Economic Growth, the Republican nominee for president Mitt Romney writes: "[W]e are in the midst of yet another great American discussion about taxation. Perhaps no policy area has become more sensitive or controversial."

Given the nation's economic and fiscal woes and its complex and increasingly uncompetitive tax system, whoever wins the White House this year will face great challenges--and great opportunities.

Lower Individual Taxes

Romney's plan makes clear that he supports a "fundamental redesign of our tax system." He calls for simplification and stability, lower individual and corporate rates, international tax reform and incentives for Americans to invest and save more for retirement. He proposes to cut the six current income tax rates by 20 percent, making the top rate 28 percent, down from its current 35 percent and 39.6 percent starting in 2013 under current law.

Romney would repeal the Alternative Minimum Tax (AMT) and the estate tax and, under his "Middle Class Tax Savings Plan," eliminate taxes on long-term capital gains, dividends and interest for taxpayers making less than $200,000. Further, he would repeal the new wage and income taxes enacted in the 2010 health care law.

Though well-intentioned, Romney's plan is short on the all-important details. It omits which tax breaks would be eliminated to pay for the cuts and it relies partially on lower rates bringing about faster economic growth as a way to fill federal coffers, a revival of supply-side economic assumptions.

In contrast President Barack Obama's tax platform can be gleaned from his administration's fiscal year 2013 budget request to Congress and the Framework for Business Tax Reform--both of which were released in February. The president has made clear his support for extending the current individual tax rates only for single individuals earning $200,000 or less and married couples making $250,000 or less.

For taxpayers above these thresholds, he proposes to tax long-term capital gains at 20 percent and qualified dividends as ordinary income, as well as phase out the Child Tax Credit and limit itemized deductions to 28 percent.

These provisions had been reduced or changed in 2001 and 2003 and were originally scheduled to expire at the end of 2010, but Congress passed and the president signed into law legislation that extended the rates to the end of 2012. Their impending expiration, along...