Mitt Romney, at a closed-door fundraiser last night:
Romney also went into greater detail than he has on the campaign trail in describing how he would maintain the progressive structure in the tax code after implementing his 20 percent across-the-board tax cut.
Democrats have argued that Romney’s tax proposals would disproportionately help the wealthy, but on Sunday, Romney identified specific loopholes and deductions for the wealthy that he would eliminate in order to both finance his tax cut, and ensure that the nation’s top earners face the same tax burden they do today. “I’m going to probably eliminate for high income people the second home mortgage deduction,” Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.
“By virtue of doing that, we’ll get the same tax revenue, but we’ll have lower rates,” Romney explained. “The nice thing about lower rates is that small businesses not get to keep a larger share of what they’re earning and plow it back in to hire more people and expand their business.”
Romney mentions three big tax breaks here worth nearly $200 billion a year, probably nearly $3 trillion over a decade: The mortgage interest deduction ($90 billion a year), the deductibility of state and local taxes other than property taxes ($50 billion a year), and the deductibility of state and local taxes on owner-occupied homes ($30 billion a year).
Now, Romney is only referring to how these taxes affect high earners, so we are talking about some percentage of $200 billion a year. And the net effect he hopes for is a tax code with a lower top rate but where the tax burden of wealthier Americans is about the same—which is why he said “we’ll get the same tax revenue.”
This is what tax reform should be; lowering tax rates and broadening the tax base.
Romney has also said that he will “pay for” his tax cut through a combo of faster economic growth (the minority) and eliminating or scaling back tax breaks (the majority).
Here’s what the Tax Policy Center says about the Romney tax plan vs. a baseline where the Bush tax cuts are made permanent and the AMT continues to get patched:
The bottom line: Leaving aside any broad economic benefits, the AMT repeal would increase the shortfall by $670 billion while the rate cuts would add about $2.7 trillion to the deficit. That’s more than $3 trillion over 10 years. In 2022 alone—the last year TPC estimated—the twin changes would add $450 billion to the deficit.
Of course, you should consider economic benefits. And now we are starting to get a better feel for which tax breaks would be altered.