Voodoo Economics: growth by lowering tax rates while also raising revenue by limiting deductions

[Texas Lawyer]

Willard promises "I am not reducing taxes on high-income taxpayers," but then he says he would "bring our rates down to encourage growth, [but] keep revenue up by limiting deductions and exemptions." Willard also promises that his undisclosed change in tax policy would "remain revenue neutral" and yet somehow also "create an enormous incentive for growth in the economy." link: http://www.msnbc.msn.com/id/48959273/ns/meet_the_press-transcripts/#.UGxYpVHMPh8

The only detail we have is Willard's vague proposal to impose a $17,000 limit on deductions that "you could use your charitable deduction, your home mortgage deduction, or others — your health care deduction." link: http://www.newsday.com/news/nation/mitt-romney-suggests-cutting-mortgage-interest-deduction-on-eve-of-presidential-debate-1.4066809

This is nonsense. If the elimination of loopholes and deductions and exemptions exactly balances the cut in tax rates, as must be the case if this change is as "revenue neutral" as Willard promises, such a neutral change would do nothing to encourage or discourage growth because it would be a neutral change.

If this were a revenue neutral change, it would not offset any meaningful reduction in the tax rates and -- even if it did -- how would that possibly create the promised "enormous incentive for growth in the economy"? This would not encourage economic growth; it would crush the recovery of the housing market.

Don't let Willard get away with Voodoo Economics!

[Skink]

1. He meant revenue Swiss

[Texas Lawyer]

2. Romney's Voodoo Economics disproportionately hits middle class voters in Colorado and Virginia.

We should get the word out:

Mitt Romney floated the idea of a $17,000 limit on itemized tax deductions Tuesday night — and is likely to get a quick lesson in the risks of providing details about his tax plans.

While a $17,000 limit would hit hardest on people in the highest tax brackets, it would take a bite out of a lot of homeowners who live in places where housing prices are high. A $500,000 mortgage, for example, would require interest payments that would exceed a $17,000 cap, leaving homeowners in and around many large cities with interest they could no longer deduct. Add in other deductions these homeowners are likely to take — including ones for state income tax — and it’s even easier to exceed the $17,000 cap.
...
Romney has proposed a rewrite of the tax code that would lower marginal tax rates and pay for it by narrowing or eliminating certain credits or deductions. But his vague plan has drawn many questions and charges that it would result in tax hikes on middle-income individuals and families.
...
A disproportionate share of mortgage interest deduction claims come from urban areas. And the GAO study noted that in 2008, tax returns from 10 such states — California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Virginia and Washington — accounted for 51 percent of mortgage interest and property tax deductions, even those states accounted for just 37 percent of all returns.

http://www.newsday.com/news/nation/mitt-romney-suggests-cutting-mortgage-interest-deduction-on-eve-of-presidential-debate-1.4066809

The Government Accounting Office confirms the disproportionate hit on middle class voters in Colorado and Virginia. See http://gao.gov/assets/600/593752.pdf

Also, this is just a tip-of-the-iceberg elimination of tax deductions affecting the middle class. If Romney is going to fund a reduction in the tax rates for the ultra-wealthy 1%, he's going to have to eliminate many, many more middle class tax deductions that just this proposal.

[porphyrian]

3. . n/t

[Texas Lawyer]

8. thanks

[porphyrian]

9. I had my fill of Voodoo Economics under Reagan. n/t

[creeksneakers2]

4. I wish more people said what you said

Romney is getting away with talking in circles and nobody seems to call him on it, not even Obama.

[Texas Lawyer]

6. I want to believe that Jim Lehrer will ask both candidates fair but probing questions tonight.

[Blecht]

5. K&R

Wish I could recommend it twice.

[Texas Lawyer]

7. thanks!