Tuesday, October 2, 2012

Romney gets ever so slightly more specific

Today, Romney suggested a way to pay for his 20% income tax cut.  He floated a limit of $17,000 on the total amount of tax deductions which are allowable in a given year.  Since lots of people, particularly the wealthy, claim much more than that in deductions each year, lots of people's taxable incomes will go up, since their deductions are limited.

I've been trying to find enough info online to do some calculations on the feasibility of Romney's proposal, but honestly I'm not having much luck.  So I'm afraid we'll have to do with just some impressions for the evening.  It seems unlikely that there would be enough savings from limiting deductions to pay for the rate cuts and other cuts.  Consider the effect on the 70% of us who take the standard deduction (that is, who don't itemize) plus people who itemize with total deductions that don't add up to $17,000.  Romney's proposal would seem to be a huge net win for these people, since they'd get the 20% cut without really giving up anything, since they are already under Romney's limit.  Even a good number of people with deductions over $17,000 will come out ahead if the 20% cut in their rates is greater than the amount they lose because they're over Romney's limit.

Where does the money come from to offset these cuts for non-itemizers and low-itemizers?  Of course some money would come from high-itemizers (who are, generally, the wealthy); however, the savings from limiting high-itemizers' deductions would first be applied to offsetting the high-itemizers' own 20% rate cuts.  If there is any additional revenue gained from limiting high-itemizers' deductions, those would, ipso facto, be net tax increases on the wealthy.  I'm perfectly willing to keep an open mind until I see Romney's numbers, but I don't think this will be the actual end result of the proposal.

So if we assume that Romney wouldn't raise rich folks' taxes, and the money for non- and low-itemizers rate cuts has to come from somewhere, we'd be left once again with the idea that tax cuts paying for themselves through increased economic growth.  It's the same thing Republicans have been selling for decades.

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