Romney Gets Progressive?
The Ryan/Romney campaign has noticed that their tax plan defies basic arithmetic. Today Romney came up with an idea that on the surface is progressive and might work.Mitt Romney Floats $17,000 Limit On Tax Deductions
Under pressure to provide more details about his tax reform proposal, Mitt Romney floated an idea Tuesday to help fill a revenue hole in his plan.
“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,” Romney told a Fox affiliate in Denver. “And higher income people might have a lower number.”
In other words, cap the total amount individuals can benefit from tax loopholes.
But while some tax policy experts like the idea in principle it suffers from at least one big political problem: though it would hit high net-worth people hardest, it would still require raising taxes on some middle class Americans to cover the cost of his proposal to cut everyone’s tax rates by 20 percent.
My guess is it would only impact the very top of the middle class. As an engineer I was upper middle class and I don’t remember having anything close to $17,000 deductions. As with all plans from Romney/Ryan with have to check the arithmetic but it’s something that should be looked at.
Matt Yeglesias points out another advantage:
That has most of the virtues of normal proposals to raise revenue by eliminating deductions, but ducks some of the political problems. The big advantage is that since no particular deduction is eliminated, you don’t reap the fury of the impacted interest groups in the same way.
Cross posted at Middle Earth Journal
Taxes Image via Shutterstock
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I disagree with Mike Y. The charitable deduction for high-income earners is usually huge! Just look at Romney’s tax returns (the ones he showed us). His deductions were in the millions for charity. That will hurt–a lot!
I have more than $17,000 a year in deductions because of medical expenses. I have to pay for nursing care that neither Medicare or my other medical insurance would pay for. This would increase my net expense by the top rate of 35% of my medical expenses which are more than $40,000 a year. This is not a luxury for me, if I went into a nursing home it would cost me more because of the level of care that I need.
Is it just me or is Romney making this all up as he goes?
I don’t think Romney is serious and you can bet if he weird he’d carve out deductions given to churches and religious organizations.
Merkin, good point, thanks.
It’s an idea, but as others have said I think it’s too broad a brush. Not every tax deduction is a “loophole”. There are really good reasons for some deductions. If I give a significant portion of my income to charity, or pay a lot in medical bills, or spend money to adopt an orphaned child, whether I’m rich or poor, I ought not have to pay taxes on that money. (In the case of adoption, I believe it’s actually a tax credit, which brings up the question on whether this includes credits also, or just a limit on deductions.)
I’d prefer to see each deduction weighed and cut the ones that we deem less important, such as the home interest deduction especially for expensive homes. But as Matt Y said, that would be harder politically, so if this is the best we can do it’s worth consideration.