I have been watching the news and in particular MSNBC. I have been trying to see as many diaries on Daily Kos as possible. I have looked high and low, but I haven't seen the outlandish statement on policy that Mitt made during the last debate that proves to me he is INCREDIBLY out of touch with the middle class workers in this country.
I wish I could clip and embed the tape (I don't know how), but here is the part from the transcript:
And so in terms of bringing down deductions, one way of doing that would be to say everybody gets — I'll pick a number — $25,000 of deductions and credits. And you can decide which ones to use, your home mortgage interest deduction, charity, child tax credit and so forth. You can use those as part of filling that bucket, if you will, of deductions. But your rate comes down, and the burden also comes down on you for one more reason.Do you see it now? Do you understand how out of touch he is with the middle class? Follow me below the fold and I'll break it down for you.
And that is every middle-income taxpayer no longer will pay any tax on interest, dividends or capital gains, no tax on your savings.
That makes life a lot easier. If you're getting interest from a bank, if you're getting a statement from a mutual fund or any other kind of investments you have, you don't have to worry about filing taxes on that, because there will be no taxes for anybody making $200,000 a year and less on your interest, dividends and capital gains.
I have been pretty luck in life. While I wouldn't say I was born on third base, I certainly would figure I was born on at least second base. I did pretty well in the genetic lottery:
* I'm white
* I'm male
* My family was solid white collar middle class
* I am smarter than the average bear
* Through scholarships, grants, loans, and family contribution I graduated from a prestigious university.
* I have become upwardly mobile as a result, have a very good income and would be considered upper-middle class at this point.
Why do I point all this out? Because I started ahead of the game, have done well, and still look at Mitts comments above and have to simply shake my head.
Seriously....Investment income? Savings Income? Capital gains?
His proposal is meaningless. What are the biggest assets for the middle class? House and retirement plan (combined 401(k), IRA, Roth IRA, etc.) After all those investments, how much do you think the typical $200,000 / year wage earner has left over for other investments? How much does a $100,000 wage earner have? $75,000? You get the idea.
It is laughable how much I have in other sources of income and what that means to me in tax liability. The other assets are already tax sheltered. The eventual sale of my home will be accompanied by the one time exemption on gains from home sales. So what great benefit will this tax break on investment income give me? Effectively ZERO!!!
Now lets look at the rest of his statement. Let's think about this "Bucket O' Deductions" 'ol Mitt talks about. He won't say how big this bucket will be, but he started out at $17,000 a few weeks ago. In the debate as you see above, he mentions $25,000. We'll figure he is looking for something in between.
So your a middle income family who itemizes deductions and what will you have on it?
* State and Local Taxes
* Home Mortgage
* Charitable contributions
* 401 (k) contributions
* Health care deductions (FSA, HSA)
There may be a few others, but this is enough to illustrate my point. Say you make 100k combined family income, Say you have a home that you took out a 150k mortgage on. You are probably deducting:
6,000 - 7,000 in annual mortgage interest
1,500 - 2,500 in property tax
3000? in state and local income tax
6,000 401(k) contributions (if you can afford it)
5000 Charitable contributions not the 10% tithing Mitt does.
So with just these estimates, we are already at $21,500 - 23,500 in annual deductions. For someone a little better off, or in a more expensive house, or with high home equity line of credit interest above the 1st mortgage, the "bucket" can get full very quickly indeed. And I'm supposed to be excited that my non existing investment income won't be taxed!!!!!!??????
His proposal is meant for one purpose in my opinion: Today, the no tax provision will be for those under $200k Over time, that cap will be raised again and again until there is no cap for "fairness" Where does tha put Mitt and his sort? Paying ZERO tax.
He is out of touch, and the middle income workers, the blue collar workers, the "waitress Mom's" will all pay the price if they get bamboozled by this man!
10:45 AM PT: Based on some of the comments and thinking about it after, I thought it might be helpful to have some "real world" numbers in the Diary. So, in that vein, I will reveal the size of my bucket. You are all welcome to reveal your buckets as well. Mine was over $38,000 last year. Some deductions were limited due to my income (specifically tuition).
If you would all like to share your buckets, please do.
The point of this is really to point out that the limiting of deductions WILL result in a tax hike for the middle class. The huge tax breaks being contemplated will undoubtedly also explode the deficit, because there won't be enough deductions to eliminate.
Back in Regan's day, there was a lot more to eliminate. Back then, all loan interest was deductible (think credit card interest). Now there is nothing much left to eliminate. And think of the consequences of eliminating charitable contributions and home mortgage interest.
It would be devastating to Non-profit organizations and the home construction business!
12:26 PM PT: Wow...Third page of recommended..Maybe we can get some legs on this part of the story.