Romney’s Tax Plan: Goodbye Deductions for State & Local Taxes, Mortgages, Charity

For those who might have missed this weekend’s Los Angeles Times and Washington Post, even Republican analysts conclude it will be impossible for Romney to cut taxes as much as he wants while maintaining any the amount of revenue needed to sustain what he’s promised voters he supports.  Romney’s plan hurts families with incomes of $100,000 to $200,000 the most by eliminating what Romney calls “loopholes” — being deductions for charitable contributions, home mortgage deductions, deductions of state and local taxes, and company-provided healthcare.

Here’s an excerpt from Saturday’s Washington Post:

“The first is that while closing loopholes sounds good — Make those oil companies pay! — the costliest ones are cherished by most Americans. These are tax provisions that promote home ownership, charitable giving, and employer-provided health care and that allow taxpayers to deduct their state and local income taxes. Limiting or eliminating these popular “loopholes” would be extremely difficult.

The second obstacle, as shown by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, is that Mr. Romney’s plan is mathematically impossible, even if it were politically feasible. Take away every deduction from every wealthy household, the center calculated, and you still couldn’t make up the revenue the government would lose by reducing rates without raising taxes on middle-class households.

Not so, Mr. Romney protested recently, and cited an analysis by Harvard economist Martin Feldstein, a Romney campaign adviser. Mr. Feldstein said the math could work — if you took away every deduction from every household earning $100,000 or more. (Even then, he couldn’t pay for the estate tax abolition that Mr. Romney also favors, but never mind.) Is that what Mr. Romney has in mind, we asked? If not, what is his plan?”

From the Los Angeles Times:

“Mitt Romney’s budget plan would significantly raise income taxes for many families making between $100,000 and $200,000, analyses by leading Republican economists cited by the Romney campaign show.

The Republican analyses were designed to rebut the Democratic charge that Romney’s plan would “increase taxes for the middle class.” The studies conclude that the plan could work as Romney has said, but that doing so would require eliminating all or most deductions and credits for households with income over $100,000. That would include wiping out such popular tax provisions as the deductions for mortgage interest, charitable contributions and state and local taxes.

Romney’s tax plan is more complex. He has proposed several measures to reduce taxes, saying that further cuts are necessary to spur economic growth. His plan includes cutting current income tax rates by one-fifth, eliminating the alternative minimum tax, ending estate taxes and wiping out taxes on dividends and interest for individuals with income below $100,000 and couples who make less than $200,000.

Those tax cuts would total between $200 billion and $220 billion a year. To keep the deficit from soaring, Romney has pledged to make the plan “revenue neutral.” That means that for every dollar the plan would reduce federal revenue, he would raise a dollar somewhere else — “base broadening,” in budget jargon.

Romney has declined to name any of the sources he would tap for new revenue. In a recent “Meet the Press” interview, he denied that his plan would raise taxes on the middle class. “People at the high end, high-income taxpayers, are going to have fewer deductions and exemptions,” he said.

So there you have it Tea Partiers.  The elimination of deductions for mortgages may discourage home ownership and hurt the real estate market in a significant way.  Charities are likely to suffer a decline in contributions.  It’s hard to be generous when you can’t deduct it from your taxes.  Think Obamacare is costly now? Just wait until you get the tax bill for your company-paid health insurance.

Saturday Night Live is always worth watching during an election season.  And this Saturday’s show opener was a speech by “President Obama” claiming his campaign had a secret weapon.  The camera then went to “Mitt Romney” making a fool out of himself during a town hall.  Rep. Paul Ryan was made fun of as well, since he is keeping so many fact checkers busy refuting a number of his claims (this weekend, Ryan misstated the number of businesses that filed for bankruptcy in 2011 .. he was off by more than 80 percent).

Governor Romney appears to be tracking on the same path of the last Massachusetts governor to seek the presidency.  Except Michael Dukakis was far more competent and had the Massachusetts Miracle to run on.  Romney appears likely to be the first presidential candidate since Al Gore to lose in his home state.  Whether it’s Michigan or Massachusetts, and likely to lose California and New Hampshire where he owns homes.