The non-partisan Congressional Budget Office study shows that we never paid for the last round of Republican tax cuts (Bush) and that those tax cuts current account for 20% of our budget deficit. Essentially, the Bush tax cuts were put on a credit card that the American people are going to have to pay for at some point through massive cuts in government (Medicare, Medicaid, S.S.) or higher taxes. Even though we already put the last Republican tax cuts on a taxpayer credit card, Romney wants massive additional tax cuts: 20% cut in federal income tax, eliminate the Alternative Minimum tax, cut taxes on corporations, and eliminate the Estate Tax for millionaires.
Romney says that he is going to pay for this new round of tax cuts by getting rid of deductions. According to the Congressional Research Service, here are the current biggest tax deductions/credits and the ones that Romney would have to look at eliminating in order to pay for his massive tax cuts:
1. Employer health insurance: $164.2 billion (Your health insurance provided by your employer is not counted as additional income to you for federal taxes)
2. Employer pensions: $162.7 billion (Money set aside by your employer in a pension for you for your retirement is not counted as additional income for federal income tax purposes)
3. Mortgage interest deduction: $99.8 billion (primarily used by middle class because of the Alternative Minimum tax for higher incomes that limits the amount of deductions they can take)
4. Exclusion of Medicare Benefits: $76.2 billion
5. Capital gains (Wall Street Earnings): $71.4 billion
6. Earned income credit: $58.4 billion (a tax credit for low and medium income working individuals with children -- it was implemented to create an incentive to work for those earning low incomes with children)
7. Deduction for income taxes: $54.0 billion (you can the deduct state and local taxes you paid from your federal income taxes)
8. Estate tax exclusions: $51.9 billion
9. Child credit: $51.7 billion (a tax credit for middle class families with dependent children -- you must make less than $110k to receive the full credit)
10. Deduction for charitable contributions: $51.6 billion
Romney will have to get rid of one or more of these deductions to pay for his massive tax cuts. Taking a closer look at which ones Romney is likely to get rid of, I think we can safely say that it will NOT be capital gains. In fact, Paul Ryan has proposed to entirely exclude capital gains from taxes. Paul Ryan thinks that capital gains should not be taxed at all.
And, in terms of the Estate Tax exclusions, Romney proposes to eliminate Estate Taxes entirely. So, which of these deductions will Romney get rid of to pay for his massive tax cuts? It has to be one of these and the odds are that the one he will choose will be a hit to the middle class.