Romney's tax suggestion gives more clarity, but details still sparse
Mitt Romney this week offered some more insight into his tax reform plan, but not enough to fully understand how his agenda may impact voters' payments to the IRS or the federal deficit.
In an interview with Denver TV station KDVR on Monday, Romney suggested capping federal income tax deductions at $17,000. "And you could use your charitable deduction, your home mortgage deduction, or others -- your health care deduction, and you can fill that bucket, if you will, that $17,000 bucket that way," he said. "And higher income people might have a lower number."
The idea was merely a suggestion and doesn't represent a formal policy proposal from the Republican candidate. It does, however, give some insight into how Romney might pay for the revenue losses that would come from his proposed tax cuts -- which could reach as high as $456 billion in 2015 if current policies are kept in place.
"It is at least a down payment on the revenue lost to the rate cuts," Robertson Williams, an analyst at the nonpartisan Tax Policy Center, told CBSNews.com.
Still, there are some major unknowns: For instance, to determine how large that down payment would be, Romney would have to give some more specifics, such as whether that $17,000 cap applies to individuals or couples.
In tonight's debate, President Obama is sure to drive home the fact that Romney's tax reform plan has so far been short on details. Romney has promised to cut income tax rates by 20 percent across the board, repeal the estate tax, and get rid of taxes in investment income for those making up to $200,000. While he has said the tax cuts would be offset in part by eliminating deductions and loopholes, he has not clarified what deductions and loopholes he would eliminate.
In email to supporters Wednesday, Obama deputy campaign manager Stephanie Cutter wrote, "We'll see if Mitt Romney finds some time in tonight's 90-minute debate to tell us specifically how he can avoid raising taxes on middle-class families and still pay for another $250,000 tax cut for multimillionaires."
The Obama campaign today blasted Romney's idea of capping deductions, charging that "just like the many other ways Romney has described his tax plan, it would raise taxes for millions of middle-class families." The campaign notes that "millions of middle-class families claim tens of thousands of dollars in tax deductions."
Indeed, more than 3.9 million households making between $40,000 and $50,000 in 2009 claimed itemized deductions, according to IRS data -- at an average amount of just over $17,000.
However, Williams pointed out that wealthier Americans benefit much more from itemized deductions. Eighty percent of the value of tax savings from itemizing goes to the top 20 percent of earners, he said. A quarter of the value goes to the top 1 percent.
Wealthy Americans, Williams said, "itemize a lot more, they have higher state and local taxes, they give more to charity." Moreover, just about 30 percent of Americans in 2009 itemized their deductions at all. A plan to cap deductions, Williams said, "does mean you don't target people at the bottom of the income distribution."
The Romney campaign responded to the Obama camp's charges by pointing to a new study from the nonpartisan Tax Foundation, which concludes that under Romney's plan, every income group would experience at least a seven percent increase in after-tax income.
"There's only one candidate in this race who raises taxes on the middle class, and that is President Obama," Romney spokesperson Andrea Saul said in a statement. "Gov. Romney will cut the tax burden on the middle class by 20 percent while eliminating taxes on their savings completely."
