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Romney quietly announces a good tax policy idea

yllus

Elite Member & Lifer
Aug 20, 2000
20,583
431
126
I've read of Mr. Romney being described as "a natural problem solver". I wonder if this is that side of him - a guy who looks at the numbers, looks at the legislation and finds a sensible solution.

Bloomberg.com - Romney Just Quietly Announced a Good Tax Policy Idea

Mitt Romney has been talking vaguely, for months, about expanding the federal income tax base, but in an interview yesterday with Denver's local Fox affiliate he got a lot more specific. The Republican presidential nominee floated the idea of capping itemized deductions at $17,000 per filer.

ABC News reports:

"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."
A few thoughts on this:

1. This is a good idea, and I wish Romney had announced it sooner. Almost every itemized deduction in the income tax code is a bad idea, and this policy would significantly reduce the value of such deductions.

2. This proposal helps to show why the complaint that 47 percent of households pay no federal income tax is a red herring. Romney's plan would greatly expand the income tax base without at all reducing the number of filers whose liability is $0. Mostly it would operate by raising the taxable income of people near the top of the income scale -- because that's where the money is.

3. Because this is a specific idea, it should be easy to score. I expect the Tax Policy Center will run the numbers soon and estimate how much revenue it would generate.

4. This proposal gives Romney a concrete response to the Obama campaign attack that he wants to raise taxes on the middle class. This policy would hold almost every taxpayer making less than $200,000 a year harmless from tax increases. If tax rates are cut by 20 percent across the board, as Romney also proposes, you would have to face a 25 percent increase in your taxable income to get hit with a tax increase.

For example, that means a family with $150,000 in income would have to be taking $43,600 in itemized deductions today in order to get hit with a tax increase -- not impossible, but unlikely. (And many of those high-deduction filers get hit with the Alternative Minimum Tax today, which Romney says he would repeal.)

5. There are some details that should be fleshed out. Particularly, many tax preferences do not take the form of deductions, but of credits or exclusions. Tax-exempt interest, health benefits and retirement contributions are excluded from gross income instead of deducted. "Above the line" deductions taken on page 1 of the Form 1040, such as for moving expenses, are also not generally subjected to limitations on itemized deductions.

In order to determine how much money this plan would raise, we need to know whether a wide variety of tax preferences would be impacted, or only below-the-line deductions. I hope Romney will indicate that his plan also hits tax exclusions, as that would raise a lot more revenue and do more to eliminate distortions in the tax code.

6. Any plan that keeps Romney's promises on cutting rates 20 percent and holding the middle class harmless has to sacrifice revenue neutrality, and I expect this plan will fall far short of raising the roughly $5 trillion over 10 years that is needed to offset Romney's tax rate cuts.

7. Romney nods toward not just capping itemized deductions but phasing them out, saying that rich people might be limited to even less than $17,000 in itemized deductions. I have no enthusiasm for this proposal, because a phaseout of deductions is equivalent to an increase in marginal tax rates.

Suppose that for every $100 in extra income you earn, you lose $10 worth of deductions, meaning that your taxable income rises by $110. If your nominal marginal tax rate is 30 percent, you pay an extra $33 in taxes -- meaning that your effective marginal tax rate on that $100 of income is 33 percent, not 30 percent.

If the point of limiting deductions is to help keep tax rates low, then a phaseout that raises effective marginal tax rates is self-defeating. If Romney wants to collect more revenue from high earners, he'd be better off proposing a higher top marginal tax rate than a deduction phaseout.

8. I continue to be annoyed that Romney committed to a 20 percent reduction in tax rates. The key problem with the U.S. tax code is not that rates are too high, but that projected budget deficits are too large and the politically palatable ways to raise revenue (such as high income surcharges and higher capital gains tax rates) are especially economically damaging. Base broadening is needed as a better way to shrink the deficit -- linking it to rate cuts that are likely to more than offset the broadening leaves us without good long-term budget solutions.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,736
670
126
Interesting idea.

I'd want to see how many middle-class filers this would affect before giving that specific number a thumbs-up or down, but it sounds like a good idea in general.

We still need to cut all kinds of spending including both social programs and military. And we will probably need a lot more loophole closing besides this one.
 

Slew Foot

Lifer
Sep 22, 2005
12,387
94
86
Of course, the rich asshole doesnt want to tax capital gains like regular income. Screw the bankers and wall street fucktards and leave the hardworking small business owners alone.
 

gotsmack

Diamond Member
Mar 4, 2001
5,768
0
71
this is just going to squeeze the middle class. if you want real tax policy how about increasing the cap gains rate.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,736
670
126
this is just going to squeeze the middle class. if you want real tax policy how about increasing the cap gains rate.
I agree with that too, but to somewhere between the current rates and the pre-Bush levels not undoing the tax cut completely.

We need revenue increases and spending cuts. Sadly both parties want different cuts and different increases and don't seem willing to compromise.
 

nehalem256

Lifer
Apr 13, 2012
15,670
6
0
this is just going to squeeze the middle class. if you want real tax policy how about increasing the cap gains rate.
In what world do you live in where the middle class has $17,000 in itemized deductions?

EDIT: And seems like Romney per-implemented his plan by not claiming all his charitable contributions.
 
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RightIsWrong

Diamond Member
Apr 29, 2005
5,650
0
0
I don't like his wishy-washy way of presenting it. It doesn't sound like a proposal to me but more of a "will this gain any traction?" type of statement.

I mean, he starts it out with "As an option, you could say..." and ends it with "And higher earners might". If it were a true proposal, he'd go all Herman Cain and state it as such.
 
Jan 25, 2011
16,106
7,619
146
In what world do you live in where the middle class has $17,000 in itemized deductions?

EDIT: And seems like Romney per-implemented his plan by not claiming all his charitable contributions.
Interest and medical expenses alone would eat up a huge chunk of that. The IRS publishes a list annually of the average deductions broken down by some income groups.

Based on the latest IRS statistics, itemized deductions were claimed on almost 33 percent of all tax returns filed and represented an estimated 61 percent of the total deductions amount. The average for total itemized deductions (after limitation) was $25,545, down 2.8 percent from the average of $26,268 for 2008.
http://www.cch.com/wbot2012/025AverageItemizedDeductions.asp

Now that being said, perhaps I'm misreading. Canadian after all. We play differently up here.
 

nehalem256

Lifer
Apr 13, 2012
15,670
6
0
I don't like his wishy-washy way of presenting it. It doesn't sound like a proposal to me but more of a "will this gain any traction?" type of statement.

I mean, he starts it out with "As an option, you could say..." and ends it with "And higher earners might". If it were a true proposal, he'd go all Herman Cain and state it as such.
You expected Romney to grow a pair?
 

Moonbeam

Elite Member
Nov 24, 1999
66,929
3,737
126
I am a natural problem solver too. If I get ants in my garden I spray. We could do thins with people who don't pay 35% in taxes. Just spray them. I love being a problem solver. I think I should be elected to the job of impregnating lots of women. Better living thought a better gene pool.
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
In what world do you live in where the middle class has $17,000 in itemized deductions?

EDIT: And seems like Romney per-implemented his plan by not claiming all his charitable contributions.
Lol I have more than 17k in just mortgage interest deductions.

I am middle class and had over 50k itemized deductions.

17k cap isn't a horrible idea but would hit middle class the hardest.
 

RightIsWrong

Diamond Member
Apr 29, 2005
5,650
0
0
Interest and medical expenses alone would eat up a huge chunk of that. The IRS publishes a list annually of the average deductions broken down by some income groups.



http://www.cch.com/wbot2012/025AverageItemizedDeductions.asp

Now that being said, perhaps I'm misreading. Canadian after all. We play differently up here.
You couldn't even begin to claim medical deductions until you've paid out > 7.5% of your total income in medical expenses.

Congress decided to fix that though and bump it up to 10% starting next year and even in that case, it is only the amount above the 10% that can be deducted. Essentially, unless you are rich enough to pay for very expensive medical treatments out of pocket, you don't get to claim anything for medical.

Oh, and the cost of medical insurance isn't a medical deduction.
 

Smoblikat

Diamond Member
Nov 19, 2011
5,185
107
106
Of course, the rich asshole doesnt want to tax capital gains like regular income. Screw the bankers and wall street fucktards and leave the hardworking small business owners alone.
Why would anyone bother to work hard if they knew all their bills would be paid by the people who make money off of people working hard?

You see how that works.........if there is noone working hard (which there wouldnt need to be if the rich paid for everyone) then stocks would go down due to dissatisfaction, which means the rich stop investing. Which means there are less rich, which means you need to tax the remaining rich EVEN higher thus restarting the process until we are all dependant on the government (socialism)
 

RightIsWrong

Diamond Member
Apr 29, 2005
5,650
0
0
Why would anyone bother to work hard if they knew all their bills would be paid by the people who make money off of people working hard?

You see how that works.........if there is noone working hard (which there wouldnt need to be if the rich paid for everyone) then stocks would go down due to dissatisfaction, which means the rich stop investing. Which means there are less rich, which means you need to tax the remaining rich EVEN higher thus restarting the process until we are all dependant on the government (socialism)
So you are basically saying that we shouldn't tax the rich at all because it is via their genorosity that they allow us to use their earnings so that we can bust our asses so that they can reap the rewards? Unless of course their "genorosity" is misappropriated into extremely risky financial vehicles or ponzi schemes and then we should feel obligated to bail them out because, without them, we won't have the honor of working ourselves to death in their factories or companies (facism).
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
Why would anyone bother to work hard if they knew all their bills would be paid by the people who make money off of people working hard?

You see how that works.........if there is noone working hard (which there wouldnt need to be if the rich paid for everyone) then stocks would go down due to dissatisfaction, which means the rich stop investing. Which means there are less rich, which means you need to tax the remaining rich EVEN higher thus restarting the process until we are all dependant on the government (socialism)
Or you could just tax capital gains as income and call it a day.
 

Infohawk

Lifer
Jan 12, 2002
17,848
1
0
It's not necessarily a bad idea but I'm not sure he deserves much praise.

If you want the wealthy to pay more taxes, there are many ways to do it. It's primarily an issue of political willpower and desire.
 

mwtgg

Lifer
Dec 6, 2001
10,491
0
0
Lol I have more than 17k in just mortgage interest deductions.

I am middle class and had over 50k itemized deductions.

17k cap isn't a horrible idea but would hit middle class the hardest.
I'm having a hard time equating having "over $50k in itemized deductions" with "middle class". Perhaps we have a different definition of middle class.
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
I'm having a hard time equating having "over $50k in itemized deductions" with "middle class". Perhaps we have a different definition of middle class.
I made over 100k less than 200k last year. That's still middle class isn't it?
 

mwtgg

Lifer
Dec 6, 2001
10,491
0
0
I made over 100k less than 200k last year. That's still middle class isn't it?
Sure, that's middle class. I'm just saying, generally speaking I don't see too many individuals making under $200k have over $50k in itemized deductions.
 

AyashiKaibutsu

Diamond Member
Jan 24, 2004
9,307
3
81
I'm having a hard time equating having "over $50k in itemized deductions" with "middle class". Perhaps we have a different definition of middle class.
I see it where I work too... People completely disconnected from reality of average people. They'll say things like "well after I pay my bills, buy everything I want, and put a bunch of money away into savings I'm just barely getting by on 150k! So I'm still just middle class too."
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
Or you could look up the history of CG and realize its not the same due to inflation.
So the wage I earned last year wasn't subject to inflation?

What your implying is money from investments are superior to money earned via labor and should be treated differently. I disagree, whether you make 100k from wages or 100k via investments it money earned.
 

Lemon law

Lifer
Nov 6, 2005
20,991
2
0
This late in the campaign, I have lost count, is this a new new new Romney tax proposal number 35, or is it attempt #53. Well one thing for sure, if everyone does not go gaga over the latest vague new Romney Tax proposal, attempt number 54 and 55 are already waiting in the wings.

Some clueless idiots like me might call it Romney flip flopping, wiser people call it for what it is, namely Romney political problem solving.
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
I see it where I work too... People completely disconnected from reality of average people. They'll say things like "well after I pay my bills, buy everything I want, and put a bunch of money away into savings I'm just barely getting by on 150k! So I'm still just middle class too."
I think I'm pretty connected to average people. Have no problem paying my taxes, paid an effective %19 last year, and wouldn't mind paying more, after all I am benefitting from the society I live in why shouldn't I pay my fair share?
 

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