Romney’s deduction cap would touch sensitive tax breaks

[progree]

19. Yup. For me the "etc." includes a couple of big deductible items: state income tax & property tax

on top of mortgage. Fortunately, I don't have enough medical/dental expenses to exceed the 7.5% AGI limit on those (only medical/dental expenses, including health insurance above 7.5% of Adjusted Gross Income are deductible. So, IF my AGI was 100 K$, and my medical/dental expenses was 10 K$, only 10 K$ - 7.5 K$ = 2.5 K$ would be deductible. If my medical/dental expenses were 7.5 K$ or less, none of it would be deductible).

This $17,000 deduction cap thing is a gimmick. The Tax Policy Center (TPC) 8/1/12 determined that Romney's plan -- cutting marginal tax rates 20% across the board, eliminating some deductions and loopholes (starting with the wealthy's first in the TPC study), and still have a revenue-neutral tax system without raising taxes on the middle class -- is mathematically impossible. Adding on a $17,000 deduction cap doesn't make the mathematically impossible suddenly possible. Actually, by adding another constraint, it becomes mathematically more impossible.

The below is my synopsis of a number of press reports on the Tax Policy Center study.

The well respected non-partisan Tax Policy Center ( http://www.brookings.edu/research/papers/2012/08/01-tax-reform-brown-gale-looney ) has determined that it is mathematically impossible for Mitt Romney's plan to not result in both a decrease in taxes paid by the higher income earners and an INCREASE in taxes paid by the middle and lower classes.

In the words of the Tax Policy Center: [font color=brown]"Even when we assume that tax breaks – like the charitable deduction, mortgage interest deduction, and the exclusion for health insurance – are completely eliminated for higher-income households first, and only then reduced as necessary for other households to achieve overall revenue-neutrality– the net effect of the plan would be a tax cut for high-income households coupled with a tax increase for middle-income households."[/font]

Romney's stated plan, at the time of the Tax Policy Center study on 8/1/12, was:

* lower marginal tax rates across the board by 20%
* eliminate the estate tax
* eliminate some unspecified deductions and loopholes
* be revenue neutral (i.e. no reduction or increase in total taxes collected)

Because the value of the 20-percent tax cut for richer Americans would exceed the gains they get from popular tax breaks that Romney might chop, they would see the greatest income gain from Romney's possible changes, the study said.

The Tax Policy Center even assumed what they called some implausibly large economic growth effects of Romney's plan.