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View Diary: It's time for some jujitsu on Mitt Romney's tax plan voodoo (73 comments)

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  •  Added jujistu moves - the deduction bucket (1+ / 0-)
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    Thursday Next

    For Mr. Romney's plan to work he says he will eliminate unspecified deductions.

    In the next breath he then suggests there will be a "deduction bucket" you can fill.

    How large is that bucket?

    One day he says $17K, the next it is $20K or perhaps $25K.

    But, there is a huge hole in his argument. You cannot propose to cut deductions and preserve them at the same time. Either we take him at his word on eliminating deductions, practically all of them, including the home mortgage interest deduction, or he is left with aq larger shortfall to fill - because of a "deduction bucket."

    •  Check out the math with your own taxes. (0+ / 0-)

      If you are in the 25% tax bracket, you may be surprised how this adds up.  I checked my taxes, and found that I would pay more if the tax rate was capped at 20%, and deductions were capped at $17,000.  Capping deductions is not the same as eliminating them.  My home mortgage comes nowhere near the cap, but add up all the other taxes paid, charitable deductions, child deductions, etc., and it adds up.   Better yet, take Romeny's tax return.  I do not know all of his income and deductions, but a cursury look tells me that if he $1.95 million in taxes at the 25% rate, then he would've paid $1.56 million at the 20% rate.  But if you cap his deduction at $17,000, then his taxes paid would increase by $450,000 for his charitable deductions alone, netting over $2 million in taxes.  Add to that the loss in other deductions, and he would've paid much more in taxes in 2011.  It could work.  Do the math.

      •  Mitt's income is bulk investment (0+ / 0-)

        derived, thus it got taxed at a 15% rate. Mitt's magic budget makes no proposition to raise the rates for such income. It intends to preserve the preferential treatment they receive under the tax code. So, unless you are now proposing to know something about the inner workings of Mitt's mind you have to take the rate presently applied and, unless he explicitly proposes raising the applicable tax rate to 20% from 15%, (he doesn't) then your estimate begins with the wrong premise.

        Further - we should look at what Romney's tax return actually said.

        From page 3 -  in the PDF

        His taxable income was just over 9 million. On which there was a tax assessed of 1.4 million. Add in AMT 0.67 million, 23K in SET and deduct roughly 0.1 million in foreign tax credits. Result 1.9 million owed. It wasn't at a 25% rate, but a combination of AMT, SET and 15% rate on his taxable income.

        He states estimated payments of 3.4 million with 1.5 million being applied to his 2012 return, in lieu of accepting a refund of the same magnitude. Yep, Mitt could have taken a massive refund in this election year. But, I digress.

        Take your premise - that he does not take any deductions, say any charitable deductions. That basically offsets the AMT his "budget" also wishes to eliminate - at the current rate of 15%. (Had the 25% rate, you incorrectly assumed, applied to the 2011 taxable income he would have owed roughly 2.95 million, after accounting for AMT - a flat 20% without AMT, remember Romney kills that - would result in just under 2.8 million owed. Or, if you will, a savings of about 200K for Mitt.)

        Meanwhile, just which deductions had to be eliminated to make this happen?

        Why, everything - besides, the "deduction bucket" is meaningless at this scale.

        Eliminating ALL deductions is far from workable. Politically.

        And, that is as, if not more important, than a what-if analysis based purely on the numbers that struggles to break even.

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