Despite its vagueness, Mitt Romney’s proposal to cap itemized deductions is prompting some insightful analyses from reputable think tanks. On Tuesday, Third Way released a report estimating that a $25,000 cap on deductions – the number Romney floated in that night’s presidential debate — would bring in only $730 billion over 10 years, a far cry from the $4.6 trillion needed for Romney’s tax cut plan to add up.
On Wednesday, the Tax Policy Center released numbers estimating that the cap would bring in $1.286 trillion in revenue over 10 years (more than Third Way’s estimate, but still not nearly enough to counterbalance Romney’s proposed tax cuts). The center also found that a $25,000 cap on deductions, combined with Romney’s rate cuts, would winding up lowering the tax bill for every income level.
That right there should tell you the plan doesn’t add up. It’s impossible to cut taxes for every single person and make up for it by simply capping deductions. The numbers also show that such a plan would mainly benefit top earners:
This is scaled according to how many people are in each group. The majority of Americans who make under $70,000 a year would get a tax cut of 0.13 percent to 1.07 percent. But those in the 95th percentile of earners, making $148,000 a year, would see a 2.6 percent cut. The top one percent and the top 0.1 percent of earners would get smaller cuts, owing to the large amount of deductions they currently claim, but they would still make out better than the bottom 90 percent as far as income tax relief.
So, in proposing the deductions cap, Romney breaks two of his campaign promises: revenue neutrality and no tax cut for the rich.