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Mitt Romney showed us in the debate that he is going try to to grab as many of the voters in the middle by lying about who he will favor with his tax policies. Some of them have been outright lies - lying about the $5 Trillion dollar tax cut coming from an across the board 20% rate decrease that he has mentioned several times in the past.

But a more important strategy is going to be to be truthful but deceptive. He will talk about eliminating loopholes and deductions - things that the average uneducated voter hears and thinks - "OK, those are things that help the rich and I don't get to use".

Another deception - the cap on personal deductions....

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Prior to the debate I had heard rumblings of a cap on deductions at 17%.

During the debate, he threw it in amongst his ramblings - throwing out numbers of 25,000 or 50,000. Boston.com has an analysis here

At first glance it sounds like "soak the rich" which plays well to the middle. But the analysis is way too simple.

Let's say you live in San Francisco or New York, and are fortunate enough - maybe you work in IT at a decent company - and you make enough money to buy a 2 BR condo with no parking or a yard. That might cost you 500,000, so you are making a lot of money to buy a condo like that, but you also live in a high cost of living area. Fine.

Your state taxes and mortgage interest deductions would easily put you over a 25,000 dollar cap. The top end of your income would now be higher, taxed at the ordinary income rate. Romney cuts your rate by 20%, but this is not offset by the loss of your deduction. You lose.

Now - imagine you are Mitt Romney. Romney would lose more of a deduction than our San Francisco friend - but here is one of the keys to the deception. The vast majority of Romney's income comes from investments and are taxed at the much lower capital gains rate. He's losing deductions on income being taxed at 15%, but the upper middle class San Franciscan is losing deductions on income being taxed at 25%. You win.

Imagine instead you are a high salaried trader. You have a lot of straight salary/bonus. You were deducting a lot of home mortgage interest on your 2.5 Million dollar pad. You lose part of your deduction, but you have a lot of money that was being taxed at the top rate which Romney just lowered by 20%. You win.

Additionally - this is only the personal deduction. The more money you have, the more money you can earn and spend outside of the scope of taxes. Our hypothetical San Franciscan with a comfortable IT income takes a trip with his family to Lake Tahoe, pays for lodging, lift tickets, whatever, has a nice vacation. His neighbor the trader in the 2.5 Million dollar house down the street goes to Lake Tahoe with his family - and a client. He writes the entire thing off as a business expense - entertaining you know - and the money goes against the earnings of his business and his kids ski lessons are deducted from his taxes - BEFORE they hit his 1040. There is a definite tax goal in a small business to make as little money as possible that gets thrown into your personal income by making what are effectively personal purchases as business expenses - a strategy Joe Schmo does not get to exploit.

Romney is throwing out this number like he's going after the one percent, but they'll be better off than they are now. The 47% who are paying no federal income taxes get nothing from a 20% cut. The people in between will get stuck with part of the bill - our children will get the rest. The one percent get the party.

It's a scam. And some of the 6% in the middle will fall for it.

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