This is a bit of a placeholder post. Yesterday Mitt Romney told a Denver TV station that he had some new ideas about his plan to reduce tax deductions in order to make up for the 20% across-the-board rate cuts he’s promised:
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. And higher income people might have a lower number.
I haven’t commented on this yet for several reasons. First, it was casually tossed out. It’s not clear if Romney is serious about this. Second, it’s a little unclear exactly what he meant: a $17,000 max on deductions from your gross income, or a $17,000 max on how much your tax bill can be reduced? Third, it’s still missing crucial details. When Romney says “healthcare deduction,” is he talking about the exclusion of healthcare benefits from your taxable income? Is that $17,000 cap for single filers or couples? Does it include the personal exemption and dependent exemptions? Etc. Fourth, he didn’t provide a number for higher income people, just a hint that it might be lower than $17,000. Fifth, there’s no telling how the math works out on this.
The first four of these things require more detail from Romney. The fifth requires an analysis from the Tax Policy Center or some similar outfit. In the meantime, there’s not a lot of point in commenting on something with so many missing pieces.
So for now I’ll limit myself to saying that it’s highly unlikely that the math works out here. Josh Barro thinks that virtually everyone making under $200,000 would see either a net tax decrease or no change at all under this proposal. And we already know that even if every single deduction for those making over $200,000 were completely eliminated, they’d see a net tax decrease too. So no matter how Romney fills in the blanks, this would amount to a net tax decrease. There’s just no way that it becomes revenue neutral, as Romney has promised, without a massive sprinkling of dynamic scoring fairy dust.