Tax expert: Romney deduction cap doesn't compute

[Beet]

According to the Tax Policy Center (which has staff who have served in administrations of both parties and which Romney himself once referred to as "objective, third-party analysis"), the tax cuts Romney has promised would cost the government $4.8 trillion over ten years, while in the debate, Romney claimed that he would not make any tax cut that raised the deficit. He said he would offset those tax cuts with deductions, suggesting that deduction limits as high as $25,000 or $50,000 would be a solution. However, the Tax Policy Center has also said that there aren't enough revenues from deductions to cover the entire cost of what Romney promises.

"It's a negative number," said Roberton Williams, a senior fellow at the Urban Institute, which joins with the Brookings Institution to run the Tax Policy Center..."There are not enough itemized deductions to offset his rate cuts," Williams said, adding that eliminating all itemized deductions for all income groups would not cover the tab for the proposed cuts."There's just not enough money there."

A tax expert with the Heritage Foundation does not dispute that reducing deductions would not be enough, and that Romney could pick up additional revenues through capital gains taxes by repealing the estate tax. However, can't say that this would be enough to close the gap that Romney's promises open up.

Romney has also promised not to raise taxes on the middle class. However, while most people who itemize deductions tend to make more than average, that still accounts for about 30 percent of taxpayers. In higher-cost areas, eliminating all deductions would certainly hurt middle class people. Eliminating the mortgage interest deduction would hurt middle class people. Introducing a capital gains tax by repealing the estate tax would hurt the middle class and be horribly regressive. It would mean that middle class people would have to pay a potentially huge capital gain on the sale of a house owned by an older relative, while millionaires get a tax break.

In Wednesday night's debate, Romney offered a series of promises, but not a plan. All indications are that his promises are unrealistic. The promises are there but there is no convincing path to achieve those promises. What if Romney promised every American a unicorn? What if he promised to cure cancer? Would that be seen as the sign of a leader-- or of a desperate man willing to say anything, no matter how dishonest? Promises by themselves, without a clear convincing plan to achieve those promises, don't mean anything. That's true for Obama, but it also must be true for Romney. We can't elect leaders just because they are willing to promise. We should look at what the candidates actually plan to do and what they have done.

[Fmr President & Senator Polnut]

Lol of course it doesn't add up... but since they won't be fact-checked

[Politico]

Spending cuts, elimination of deductions, and growth will all contribute to ensuring the rate reductions do not add to the deficit. If it turns out that the rates cannot be cut 20% across-the-board, maybe it can only be done by 10-15%, then that is what will be done. The pledge is that tax reform will NOT add to the deficit nor will they increase tax burdens. We're going to essentially gut red tape. Some bureaucrats, accountants and lawyers won't like it, but the American taxpayers must triumph over the special interest groups.

Obviously a commission will iron out the fine details in November, December and January.

[Beet]

Spending cuts can't be used to pay for Romney's tax cuts because they're already needed to reduce the deficit. Obama has already cut discretionary spending (the part he has control over) to the lowest as a share of the economy since the Eisenhower administration.

Capping deductions wouldn't simplify the tax code. It would just introduce a cap, which is another layer of complexity. To simplify deductions you would have to eliminate them altogether. So why is Romney suggesting that a cap will simplify the tax code? Which leads to the idea of when it is said 'elimination of deductions' what does that mean?

Elimination of all deductions? Or elimination of all deductions over $25,000, or $50,000, or $17,000? Contrary to what Romney suggested in the debate, it matters which one it is. For instance, elimination of all deductions would hurt small business, the very ones Romney says he'd help. Currently, businesses deduct the cost of doing business. The transportation costs of a salesperson who travels all over the country, the cost of spoiled inventory for a retailer, and the cost of computer and desk space for an office worker. Without being able to deduct these costs, business investment and hiring would plummet because many projects that once seemed profitable would no longer be profitable.

If it is a cap of $17,000 on deductions, then that doesn't come close to paying for Romney's $4.8 trillion in tax cuts. William Gale, who was a senior White House economist in the administration of President George H.W. Bush, says the Tax Policy Center is analyzing Romney’s latest concept of capping deductions. He said it appears the deduction cap would raise only $1 trillion to $2 trillion of the needed $5 trillion, he said in a telephone interview with Bloomberg News.

That's a $3 to $4 trillion hole.

If Romney isn't going to cut rates by 20 percent, then why is he saying it? Where does this number come from? What's the logic behind it?

[King]

Well hopefully Obama responds to it in the next debate with a stronger zinger than a smirk and nod.

[Politico]

I am beginning to suspect that Beet is an accountant. No other explanation for such fear of tax reform...

[Warren 4 Secretary of Everything]

I am beginning to suspect that Beet is an accountant. No other explanation for such fear of tax reform...

That was actually quite hilarious. You know what Politico, I'm entering you into the Good Posts Gallery.

[J. J.]

Well, I think just picking  one change is really being disingenuous.

It would be like asking, "How can I save $200 a month?"  You might look at your cable bill and say, "Well, if I cut some of these channels, I can save $30 a month." That alone won't save $200/month, but it is part of the solution.

[Beet]

Well, I think just picking  one change is really being disingenuous.

It would be like asking, "How can I save $200 a month?"  You might look at your cable bill and say, "Well, if I cut some of these channels, I can save $30 a month." That alone won't save $200/month, but it is part of the solution.

Oh no, I'm not limiting anything. How else would Romney pay for his tax cut? I'm all ears.

The only thing is, when someone says they'll save you $200 a month by cutting $30 from the cable bill, and the only other items on your budget are food, clothing, shelter, health care, transportation, education for the kids, it's logical to ask "so where is the other $170 going to come from?"

Politico: LOL, now I'm an accountant. I shared with you once about myself, and you used it to be resentful towards me. I do agree with Romney on one thing though: I don't apologize for being successful, for being sought-after by employers, for having a life that is full enough to prevent me from spending as much time here as some people. But I'm not an accountant.

[Politico]

But I'm not an accountant.

Tax specialist lawyer then?

They're the only two groups (some folks in the IRS, too, I guess) who have anything to worry about when it comes to tax reform (the benefits will outweigh the costs for EVERYBODY ELSE), so chill out with the hysterical posts if you're not a tax specialist lawyer or an accountant.

Even if Obama is re-elected, he'll need to turn to tax reform if he wants to accomplish anything. The GOP will not work with him on anything else. The reason is because tax reform is how we can create incentives that will produce real growth. It's not a guarantee (nothing is except death and taxes), but it is our best hope going forward.

[Beet]

Never mind, I just remembered how Romney is going to pay for his promises



Shut down the thread, it was all a mistake...

[Politico]

Never mind, I just remembered how Romney is going to pay for his promises



Shut down the thread, it was all a mistake...

This is about as realistic as a gay wedding ceremony between Bert and Ernie.

Only about 15% of PBS' budget comes from federal subsidies. The rest is from donations. "Viewers like you" will fill the gap, right?

We need to stop with the mentality, 'OH, IT'S ONLY $350 MILLION." That's a mentality that is going to sink this country. It all adds up over time as evidenced by our debt-to-GDP ratio of 100%. Keynesian politicians need to read the part in the General Theory that says, in so many words, that you pay down the debt when times are good. There is nothing in the General Theory about deficit spending for 40+ years. The politicians do not have the right incentives, and this "Big Bird meme" is not helping to change that.

[Politico]

"Every tax provision needs to prove it has a tangible benefit to our economy or society. If not, it doesn’t belong in the tax code."
- Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee

Glad to see I'm not the last reasonable Democrat, not the last Democrat who despises tax-and-spend liberalism and the "Chicago Way."

Sen. Baucus is a reasonable man that President Romney will be able to work with in our quest to improve America.

[J. J.]

Well, I think just picking  one change is really being disingenuous.

It would be like asking, "How can I save $200 a month?"  You might look at your cable bill and say, "Well, if I cut some of these channels, I can save $30 a month." That alone won't save $200/month, but it is part of the solution.

Oh no, I'm not limiting anything. How else would Romney pay for his tax cut? I'm all ears.


He could look at closing other loopholes, or reducing deductions.  He could, for example lower some deduction cut offs.

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Yes, but it isn't logical just to focus on one.

[memphis]

I am beginning to suspect that Beet is an accountant. No other explanation for such fear of tax reform...

Golly mister. You must be one of them fancy educated folks with them there facts.

[anvi]

In order to successfully tackle our massive and perilous deficit, we will have to both make cuts to our largest spending programs (and finding ways to hold down health care cost inflation sure wouldn't hurt) and raise revenues net.  We have to make painful spending cuts no matter how much we can reasonably raise revenues, and we will have to raise revenues net from both the upper and middle classes no matter how much the economy can reasonably be expected to grow.  Romney wants everyone to believe we can tackle the deficit without raising net revenues from anyone.  Obama wants the middle class to believe that we can close the deficit hole by only taxing the wealthy more and shaving around the edges of entitlement spending.  Both are wrong, and worse, both know better, which means that both of them are lying.  So, why pick between them?  Because only one of them will win, because both citizens and the states still need federal government support, and because you can't recover from debt if you refuse to make more money.  Plus, re Nathan, I don't want Mitt nominating federal judges.

[Politico]

Anvi, with regards to solving their fiscal calamity, you should ask Spain how their tax-heavy approach is working out for them.

Do you want America to burn to the ground? Because 21st Century Nero is reading his teleprompter while America burns. We can try to put out the fire, or we can let Nero continue to read his teleprompter for four more agonizing years. Maybe Nero will get his feelings hurt for being told he can no longer read his teleprompter, but I think it is more important to actually try to make sure the next four years do not look like the last four years...

[○∙◄☻¥tπ[╪AV┼cVê└]

Anvi, with regards to solving their fiscal calamity, you should ask Spain how their tax-heavy approach is working out for them.

Do you want America to burn to the ground? Because 21st Century Nero is reading his teleprompter while America burns. We can try to put out the fire, or we can let Nero continue to read his teleprompter for four more agonizing years. Maybe Nero will get his feelings hurt for being told he can no longer read his teleprompter, but I think it is more important to actually try to make sure the next four years do not look like the last four years...

Or we could ask Mexico how their tax-light approach is working out for them.

[anvi]

Politico, when you read English sentences, do you understand them?  Or, more likely, do you just selectively pay attention to whatever you want that will allow you to drop as many of your memes into your posts as possible?  I said both painful spending cuts and raising revenues net.  If we're going to successfully tackle the deficit and maintain a functional system of government, we have to do both.  Insofar as either candidate suggests we only have to do one of them, they are not telling us the truth.        

[🐒Gods of Prosperity🔱🐲💸]

Romney has also promised not to raise taxes on the middle class. However, while most people who itemize deductions tend to make more than average, that still accounts for about 30 percent of taxpayers. In higher-cost areas, eliminating all deductions would certainly hurt middle class people. Eliminating the mortgage interest deduction would hurt middle class people. Introducing a capital gains tax by repealing the estate tax would hurt the middle class and be horribly regressive. It would mean that middle class people would have to pay a potentially huge capital gain on the sale of a house owned by an older relative, while millionaires get a tax break.

What this? I don't think Romney proposed raising capital gains taxes.

If Simpson-Bowles can find enough deductions to lower rates significantly and still generate revenue, Romney can lower rates even more and come out revenue neutral.  The problem with that is that then nothing's done directly on the deficit. A better tax structure could help with economic growth and thus bring in more revenue, but there's no way to know how large this effect would be.

[Politico]

Politico, when you read English sentences, do you understand them?

Anvi, when you talk about economics do you have any idea what you're talking about, or are you like the president?

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Spending cuts coupled with tax hikes is a double-whammy, buddy. Even Beet agrees with me on this one. It will drive the nation into a recession if we try it. If you do not believe me, go ask the CBO. They're projecting a contraction of 5% next year if we go off the fiscal cliff, which is Obama's "secret" plan, really his only plan, for the future...

[anvi]

We are talking about decreasing the deficit in this thread.  For that, you need long-term, phased in spending cuts and revenue hikes.  Tax increases and spending cuts will have to be phased in over a ten year period in order for the economy to be able to absorb them, nobody is suggesting that they be phased in right away.  

How the deficit reduction process interacts with labor market growth is not a straightforward matter.  The economy is actually doing fairly well right now, and the reason the labor market is lagging is because businesses have found ways to meet productivity levels that correspond to current demand with smaller domestic labor forces.  Given current levels of demand, they are not going to start hiring swaths of people just because of a marginal rate cut that places their tax liability somewhere around the current effective rate.  They'll start hiring more when there is increased demand and thus need for increased productivity.  That's why deficit-reducing measures have to be phased in over time, so that process can happen.  But the deficit reduction measures have to be phased in, unless you want ever-increasing dangers of further credit downgrades and spiking interest rates in the future, which will do far more harm to the economy that slight upward adjustments in net tax revenues for everyone.
   

[pbrower2a]

Spending cuts, elimination of deductions, and growth will all contribute to ensuring the rate reductions do not add to the deficit. If it turns out that the rates cannot be cut 20% across-the-board, maybe it can only be done by 10-15%, then that is what will be done. The pledge is that tax reform will NOT add to the deficit nor will they increase tax burdens. We're going to essentially gut red tape. Some bureaucrats, accountants and lawyers won't like it, but the American taxpayers must triumph over the special interest groups.

Obviously a commission will iron out the fine details in November, December and January.

Absolutely nothing is going to be resolved in American politics except in the general election. Surely you admit that the prospect of Mitt Romney as President, a Republican majority in the Senate, and an enhanced Republican majority in the House ensures that Republicans will do nothing to solve anything while Obama is President. After all, a troika of Karl Rove, Grover Norquist, and someone else (Ralph Reed?) will wait until corporate lobbyists run Congress in full. On the other side... I need not tell you. You think it so horrible that it is unthinkable. Maybe trolls like you don't think things through as much as we do.

Congress is not in session and will not be until at least a Lame Duck session (little chance), and most likely January 3. So what can Congress do when it is not in session?       

[Torie]

Spending cuts, elimination of deductions, and growth will all contribute to ensuring the rate reductions do not add to the deficit. If it turns out that the rates cannot be cut 20% across-the-board, maybe it can only be done by 10-15%, then that is what will be done. The pledge is that tax reform will NOT add to the deficit nor will they increase tax burdens. We're going to essentially gut red tape. Some bureaucrats, accountants and lawyers won't like it, but the American taxpayers must triumph over the special interest groups.

Obviously a commission will iron out the fine details in November, December and January.

Yes, you need aggressive dynamic supply side economics scoring to make the Mittens numbers work. Since that has been overhyped in the past, the least Mittens could do is say he will shave back the rate cuts if the supply side white knight does not ride to the rescue.

I have been telling you Politico that this would hurt Mittens  -  and it deserves to - just like Obama's pathetic record on entitlements should hurt him.

[Politico]

Spending cuts, elimination of deductions, and growth will all contribute to ensuring the rate reductions do not add to the deficit. If it turns out that the rates cannot be cut 20% across-the-board, maybe it can only be done by 10-15%, then that is what will be done. The pledge is that tax reform will NOT add to the deficit nor will they increase tax burdens. We're going to essentially gut red tape. Some bureaucrats, accountants and lawyers won't like it, but the American taxpayers must triumph over the special interest groups.

Obviously a commission will iron out the fine details in November, December and January.

Yes, you need aggressive dynamic supply side economics scoring to make the Mittens numbers work. Since that has been overhyped in the past, the least Mittens could do is say he will shave back the rate cuts if the supply side white knight does not ride to the rescue.

I have been telling you Politico that this would hurt Mittens  -  and it deserves to - just like Obama's pathetic record on entitlements should hurt him.

Romney was forced into a corner by Santorum in Michigan, so he had to present a bold idea of 20% across-the-board rate cuts. Otherwise, he risked losing the nomination in Michigan. Compromising on the 20% figure after the election is not necessarily the end of the world. Ultimately, Romney's pledge for tax reform consists of only two uncompromisable principles:

A) Reform must not add to the deficit
B) Reform must not increase tax burdens for anybody (i.e., no new taxes)

If Romney violates one of these two principles, I will back a primary challenge in 2016 (as will many staunch Republicans, which is why it will not happen; Romney has a POWERFUL incentive to stick to this pledge).