Late yesterday, Mitt Romney threw out the idea of limiting tax deductions to $17,000 as part of his strategy to keep his tax plan revenue neutral. Up until this point, the Romney campaign had provided bupkis for details and that annoyed quite a few people who like details. Despite everyone's begging, they continued to stall even after Tax Policy Center issued a paper that basically said, "Based on the facts we have and after making some reasonable assumptions based on things Mitt Romney has said, taxes on the middle class will have to go up." The Romney campaign didn't care for that ONE BIT, sicced the Wall Street Journal editorial board on the TPC and continued to stall.
But yesterday, Willard finally offered something up, telling Denver's FOX affiliate:
As an option you could say everybody's going to get up to a $17,000 deduction; and you could use your charitable deduction, your home mortgage deduction, or others — your healthcare deduction. And you can fill that bucket, if you will, that $17,000 bucket that way. And higher-income people might have a lower number.
Since people have been agonizing for something like this, these comments got a lot of people's attention. Here's a rundown of what a few notable tax and budget commentators have said.
Cutting tax breaks one-by-one is trench warfare with some of America's most powerful political lobbies. That's why real world tax reformers always eventually start looking at limits that hit all tax breaks a little bit. The complexity, the diffused effect, and the idea of shared sacrifice all seem to blunt the political backlash. [...] Mitt Romney offered us another version of this type of limitation[.]
[T]his does give us some insight into how Romney is thinking about tax reform. Rather than picking fights over individual tax breaks, he’s looking to put a cap on total deductions. It’s reminiscent of Martin Feldstein’s “2% plan” and of Richard Thaler’s “28% plan.” That’s a promising approach. The question now is whether we get more details from the Romney campaign, or whether they’re just trying to throw something out there so they have something vaguely plausible sounding to say when pressed for tax specifics during the first presidential debate.
This is a good idea, and I wish Romney had announced it sooner. Almost every itemized deduction in the income tax code is a bad idea, and this policy would significantly reduce the value of such deductions. [...] There are some details that should be fleshed out. Particularly, many tax preferences do not take the form of deductions, but of credits or exclusions. Tax-exempt interest, health benefits and retirement contributions are excluded from gross income instead of deducted. "Above the line" deductions taken on page 1 of the Form 1040, such as for moving expenses, are also not generally subjected to limitations on itemized deductions. In order to determine how much money this plan would raise, we need to know whether a wide variety of tax preferences would be impacted, or only below-the-line deductions. I hope Romney will indicate that his plan also hits tax exclusions, as that would raise a lot more revenue and do more to eliminate distortions in the tax code.
I have to see the details because I can't get behind this idea until I know middle class taxes will not go up.
Roberton Williams of the Tax Policy Center is quoted in the Christian Science Monitor:
If Romney were to actually make this his plan, it would clearly raise a lot of money[.] [...] A lot of folks are itemizing more than $17,000 per year, including Mitt Romney, whose itemizing is in the millions.
The issue that always comes up when this sort of proposal is raised is that it is geographically discriminatory[.] [...] If you live in a low-cost area, you don't get hit by caps at all. If you're in a high cost area, you're limited.