Yesterday Mitt Romney offered a far more specific method to get out of his tax math hole than ever before, proposing a potential cap on deductions at $17,000 per person. All deductions for individual tax filers, presumably, would remain active; but once you hit $17,000 with any combination of them, you would be done.
Here’s how Romney described it:
“As an option you could say everybody’s going to get up to a $17,000 deduction; and you could use your charitable deduction, your home mortgage deduction, or others – your healthcare deduction. And you can fill that bucket, if you will, that $17,000 bucket that way,” he said during a visit with Denver’s FOX31. “And higher income people might have a lower number.”
The “healthcare deduction” is actually known as a tax exclusion for employer-provided health care, and not technically a deduction. You don’t file your health care expenses unless you’re self-employed. And there are plenty of other questions, like whether this replaces the standard deduction. Clearly this was off the top of Romney’s head and not fully fleshed out, though the $17,000 number seemed practiced. Perhaps we’ll hear more at the debate tonight.
One problem is that this doesn’t really get Romney out of his tax box. Remember, he wants to reduce individual rates across the board by 20%, and pay for it by removing tax expenditures like deductions, and also not have the middle class, broadly defined as anyone making under either $100,000, $200,000 or $250,000 (depending on what day it is) pay any more. This remains mathematically impossible even under this simplified deduction cap. Even zeroing out deductions above $250,000 doesn’t get you the money you need to offset the 20% drop in rates. And this doesn’t zero things out. So if rich people pay less under Romney’s plan, somebody would have to pay more. Howard Gleckman of the Tax Policy Center makes this argument in a snap analysis.
“It goes back to the same problem that we’ve raised,” says Howard Gleckman, an expert at the non-partisan Tax Policy Center, which famously concluded Romney’s tax plan would require raising taxes on middle-income earners. “He’s promised all these things and he can’t do them all. In order for him to cover the cost of his tax cut without adding to the deficit, he’d have to find a way to raise taxes on middle income people or people making less than $200,000 a year. This might do that, but without way more details than he’s providing there’s no way to know who gets hit and how much they get hit by.” [...]
“This would generate a lot of revenue,” Gleckman said. “It would ask some people to pay more clearly, but whether or not it would hit the middle class depends on what you define as middle class — whether you believe someone making $199,000 is middle class.”
If you think about deductions that make their way down to the middle class, the home mortgage interest deduction and state and local taxes alone could eat up the $17,000. That leaves a lot out in the cold, so clearly their taxes would rise.
There are ways to progressively tailor something like this, however, specifically by ratcheting the deduction cap down as income rises. And those who don’t itemize, including pretty much all of the working poor who pay federal income taxes, would just get the benefit of the rate drop. Senator Pat Toomey (R-PA) proposed a deduction cap previously in a budget proposal, and while Robert Greenstein of the Center on Budget and Policy Priorities hated the overall plan, he liked the deduction cap idea for precisely this reason.
However, President Obama proposed a type of deduction cap, specifically on the percentage benefit from deductions that people earning above $250,000 a year can take. This was one of the ways his initial health care proposal was funded, and later, he tried to use that revenue-raiser to fund the American Jobs Act. And Congress basically returned it DOA. They said it would hurt charitable giving. They rejected it out of hand, Democrats and Republicans alike. And I suspect this would work the same way.
Mitt Romney by DaveLawrence8 under Creative Commons license




19 Comments

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Whether or not it is what Romney meant, getting rid of itemized deductions in favor of a substantial increase in the standard deduction would really simplify tax preparation across the board, and increase the number of low-income people who pay no income taxes. Actually an interesting idea.
I’d be impressed if Romney proposed something that would raise his own tax burnden more than 1%, but the Master’s of the Universe (MOTU) and Romney’s taxes are too similar to allow that to happen.
asshat didnt say anything, he said you “could” do this.
he didnt say it was his plan.
As is the case with virtually everything, the devil is in the details. However, if the Demo party simply seizes on the $17G’s and pushes it as a meme, it would seem to me there might be some considerable political mileage available. People do enjoy their Schedule A’s, and the HMD is what usually puts them over the top to qualify for that schedule.
If this included the deduction for state and local taxes that would cut a huge swath through that $17,000 for the middle class in many states.
As long as the deficit is the story we lose and they win. Fuck the deficit already, here is who “we” owe the deficit to…
Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)
So America owes foreigners about $4.5 trillion in debt. But America owes America $9.8 trillion.
When unemployment is low our consumer driven economy will have a surplus so let’s have no deductions for business or uber wealthy people unless the deduction is tied to creating a job with benefits (to be defined by smarter people than me). In other words you can’t call yourself a “job creator” unless you can prove it on your tax form every year.
What the hell are all these “charitable” deductions the Romney people keep talking about. Its a talking point because I have heard it several times since the weekend.
I honestly dont know people who have enough disposable income that they make enough “charitable” donations to have any effect on their taxes. Or more to the point, dont have enough to be charitable in the first place. Usually what happens is they are a couple of $100 away from not having to owe or getting a deduction and then decide that the junk they dropped off at Goodwill was worth $200.
To me this charitable crap is for the rich who can use it to manipulate their taxes. Not being churchy type I also dont know if “tithing” counts but if it does thats a 10% reduction right there.
IMO its some kind of code aimed at rich people and we peons cant hear the whistle
So Romney has a backdoor plan to kill the home mortgage deduction? Why not a plan to tax Cayman Island holdings?
Alternet has a very good piece on why Rich people prefer charitible giving over paying taxes. Basically they don’t want any of their money going to people they think of as “unworthy”.
It would certainly finish off people, like myself, who have had huge medical expenses, enough, actually, to accumulate a loss carry forward, on paltry income. And I have Medicare! Geez Louise, think this all the way thru, why don’t you. This will kill some modest/low income people. Like seniors. Is that the plan?
Yes that is the plan, reduce the surplus population.
I might, MIGHT, support capping deductions on an income pro rated basis. But that would have to be carefully vetted to ensure fairness and given the history of those kinds of attempts, could end up badly(see, AMT).
It is clear the majority is not in charge and any benefits that come to the average citizen are collateral. What would Jesus do, I wonder. I don’t remember a parable with the moral “kill all the poor people”. Since they will have so much trouble getting into heaven (Camel-eyeof needle) I guess they have decided to make it hell on earth for the non-rich.
Watch the debates tonight on Democracy Now! and you will hear alternative solutions that are for the benefit of the majority because they will pause the debate and let Stein and Anderson answer the same Q’s R and O get. It will open some eyes to hear Green Party and Justice Party platform.
Deductions apply to taxable income. You can limit deductions to 0 and still avoid paying taxes if you are a rich person by simply lowering your taxable income.
I have an idea for Mitt: tax capital gains at the full rate and then offer a capital gains deduction of 15% and limit THAT to $17,000 and see how long it takes for the other rich people to throw you out of the country club.
You’ve never been more right.
Middle class has no tax deductions of consequence. All these breaks were writen by congress to benefit thesemlves and their benefactors. Problem is, there will never be any changes by the legislaturds because almost ALL of them are millionaires and they won’t raise taxes on themselves and their “owners”.
“Close tax loopholes”…..when pigs fly.
Don’t worry, NEVER gonna happen.
When you say “full rate,” you mean regular income rates? I have long thought that income is income and people shouldn’t be penalized for working for a living: WTF makes earned income inferior? Class warfare, indeed.
Lots of people thought lots of craziness “isn’t going to happen.” Well, it has, so don’t get cocky. It’s just a matter of framing and a few often repeated lies and we’re off to the deduction capping races. Of all the impossibilities that have come to actual pass, deduction capping is almost a throwaway item.