"Romney’s New Tax Deduction Idea Still Doesn’t Make His Plan Add Up"
Mitt Romney yesterday floated a proposal to cap the amount of tax deductions that an individual can take at $17,000, in response to criticisms that his plan would cut taxes for the rich while raising them on the middle class. As ABC News reported:
“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 idea is not fully fleshed out and leaves a lot of questions unanswered, including whether or not the health care exclusion will be included (which saved the average family about $3,800 in 2006). But while including a cap on deductions would certainly cause Romney’s tax plan to raise more revenue, it still doesn’t make his plan add up.
Romney has laid out three criteria for his tax plan: it will cut income tax rates by 20 percent, not add to the deficit, and not raise taxes on the middle class. However, as an analysis by the Tax Policy Center shows, Romney can’t achieve all of those goals. Without ceding to a smaller rate reduction, Romney must either add to the deficit or raise taxes on the middle class.
Romney’s new idea doesn’t change that basic equation. The Tax Policy Center analysis, after all, assumed that Romney eliminated all tax deductions for the wealthy. Capping deductions at $17,000 obviously preserves $17,000 (or whatever number Romney settles upon) worth of deductions for the rich, meaning he will either have to expand the deficit or raise taxes elsewhere to make his tax plan reality.
“It goes back to the same problem that we’ve raised,” TPC’s Howard Gleckman told Talking Points Memo. “He’s promised all these things and he can’t do them all.
As Citizens for Tax Justice noted, “there is simply no way to Romney could fill in the details of his tax plan in a way that will not result in huge tax cuts for the very rich.” A cap on deductions may be a good idea in the abstract, but it doesn’t make Romney’s plan add up.