"Middle Class Families Could See Big Increases Under Romney’s Modified Tax Proposal"
Republican presidential candidate Mitt Romney, facing criticism over how he would keep his tax plan from adding to the deficit or raising taxes on the middle class, this week proposed a new feature: he would cap the amount of tax deductions that could be claimed at $17,000. But that idea still doesn’t make the math work for Romney’s plan, according to Tax Policy Center economist William Gale, who worked on the original TPC report that showed Romney’s plan couldn’t possibly achieve all of his outlined goals.
And even as Romney’s new feature won’t “come close” to paying for his plan, it could also lead to additional tax increases on families who wrote off more than Romney’s cap, unless it exempts common deductions for the middle class (like health care and home mortgage interest), Bloomberg reports:
That won’t bring in enough revenue to make up for almost $5 trillion the government will lose over 10 years once tax rates are reduced by 20 percent as Romney has proposed, according to economist William Gale of the Brookings Institution in Washington.
“It doesn’t come close to paying for the $5 trillion,” said Gale, who co-authored a study of Romney’s tax plan for the non-partisan Tax Policy Center in Washington.
At least 3.7 million U.S. taxpayers last year reported deductions of $25,000 or more. About 10 million others wrote off $15,000 to $25,000. Romney says their taxes wouldn’t go up, and in fact would decline, under his 20 percent across-the-board tax rate cut.
Romney has made several promises about his plan: it won’t add to the deficit, it won’t reduce the share of taxes paid by the rich, and it won’t raise taxes on the middle class. The original Tax Policy Center report found that Romney couldn’t possibly keep all three of those promises if he cut rates by 20 percent across the board, as he says he will.
In the abstract, capping deductions is not necessarily a bad idea, and could cut taxes for some middle class families. But for others, it could lead to a higher tax bill. Deductions popular with both parties, like the home mortgage interest deduction and the deduction for health care costs, could also be limited by Romney’s plan, eating up large chunks of the amount middle class families are able to write off each year.