One of the extraordinary but little remarked comments that Mitt Romney made during the second debate was when, asked specifically what deductions he would eliminate in order to pay for his tax cuts (that would cost $5 trillion over ten years), he again avoided being specific but said:
And so, in terms of bringing down deductions, one way of doing that would be say everybody gets — I’ll pick a number — $25,000 of deductions and credits, and you can decide which ones to use. Your home mortgage interest deduction, charity, child tax credit, and so forth, you can use those as part of filling that bucket, if you will, of deductions.
What struck me was the casual “I’ll pick a number”. Two weeks earlier, he mentioned a figure of $17,000, again seemingly off-the-cuff. He seems to think that tax policy is something that can be done on the fly, by picking random numbers, depending on the occasion.
But at least these were definite figures and so the Tax Policy Center had something to work with and ran the numbers for both these deductions limits. They found that the $25,000 cap on deductions would increase revenues by only $1.27 trillion, less than a third of the amount required, while the $17,000 cap would raise $1.66 trillion, or almost exactly a third.
Romney must have picked the number $25,000 because that would be around the average of the itemized deductions that most people claim and would satisfy most people that their present level of exemptions would be untouched. According to the invaluable Tax Policy Center,
Itemized deductions averaged about $26,344 in 2009 for tax units claiming them (figure 2). Married couples filing jointly tended to have higher deductions, averaging nearly $32,000; deductions averaged nearly $19,000 for single filers and almost $20,000 for heads of household.
In order to be revenue neutral, it is clear that his deductions limit would have to be much lower than $17,000, possibly zero, though it has been claimed that even that would not be sufficient. So the ‘new’ Romney-Ryan tax plan gets an F grade again.
Matt Taibbi, in his usual entertaining way, describes how Romney seems to have decided to let himself go and divorce himself from reality altogether and say anything at all if he thinks it will get him elected. In the process he asks the question that I too asked two weeks ago which is that, apart from the unworkable math, there seems to be no point to his tax plan if it is going to be revenue neutral.
I wonder if anyone is going to ask him about this.