Skip to main content
Part of complete coverage on
 

Romney starts to fill in blanks on his tax plan

By William Gale, Special to CNN
updated 11:31 AM EDT, Fri October 5, 2012
STORY HIGHLIGHTS
  • William Gale: Mitt Romney's $5 trillion tax cut proposal didn't add up for months
  • He says new idea of a cap on deductions is a first step toward a viable plan
  • Gale says the cap wouldn't be nearly enough to pay for the tax cuts, but it would help
  • He says that it could make taxpayers much less likely to give to charity

Editor's note: William Gale is a senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center.

Washington (CNN) -- For months, voters have been in the dark about key details of Mitt Romney's tax plans.

He specified $5 trillion in tax cuts, a 20% cut in income tax rates, a 40% cut in the corporate tax rate, repeal of the estate tax and alternative minimum tax and elimination of taxes on interest, dividends and capital gains for households with incomes below $200,000.

He did not want his changes to raise the deficit, but he was utterly mum on how to raise $5 trillion to offset the tax cuts.

William Gale
William Gale

During the summer, two colleagues and I showed that if Romney did not want to add new taxes on savings and investments -- and raising savings and investments is the second of four main planks in Romney's overall economic package -- he could not finance his tax cuts without generating a net tax cut for households with income above $200,000.

Politics: 5 things we learned from the presidential debate

Even if all the available tax expenditures were closed in the most progressive manner possible, it would not raise enough revenue among high-income households to offset the tax cuts they would receive. This was true even when we adjusted the revenue estimates to allow for the impact of potential economic growth, and even when we gave the campaign a trillion-dollar mulligan by ignoring the cost of the corporate tax cuts.

As a result, we concluded that if Romney did not impose new taxes on savings and investments, the only way to finance his tax cut proposals and reach revenue neutrality was to raise taxes on households with income below $200,000.

This was not a forecast of what Romney would actually do; it was simply a matter of arithmetic.

Romney: I will not raise taxes
Obama: 'The real Mitt Romney'
The best from the Denver debate

But it highlighted the need for specifics; $5 trillion is not a trivial amount, even in Washington, and the prospect of middle-class tax increases sets off alarm bells.

Earlier this week, Romney finally started the process of proposing ways to pay for his tax cut proposals. He broached the idea of putting a cap on each taxpayer's total amount of itemized deductions -- including mortgage interest, state and local taxes, charitable contributions.

Although critical design features remain foggy, Romney has said the cap could range from $17,000 to $50,000, and it could vary with income.

Several things are already clear.

Opinion: Why you should vote for Romney

First, capping -- or even eliminating -- itemized deductions will not come close to paying for Romney's tax cuts. It would be a step toward financing, but much more will be needed.

Nevertheless, as a piece of the revenue puzzle, a cap is an interesting and important idea and a welcome step forward.

Members of Congress are quick to see the political advantages of a cap. Relative to curtailing specific deductions, a cap allows them to leave existing deductions in place but restrict the overall use of such deductions. In that sense, the cap is like the alternative minimum tax was intended to be -- a limit on the overall use of tax shelters, even if political leaders could not shut down each one.

A cap on itemized deductions goes after one of the three areas of the income tax where the money is. The other two are the exclusion of health insurance premiums from taxation and saving and investment incentives like 401(k) plans, and the lower tax rates on capital gains and dividends and carried interest. A cap on a taxpayer's use of all of these subsidies -- as opposed to just itemized deductions -- could get at all three areas.

Martin Feldstein of Harvard University and the Romney campaign and Maya MacGuineas of the Center for a Responsible Federal Budget have proposed a different style of cap that applies to more than just itemized deductions.

While Romney's cap appears to apply to all itemized deductions, it may have a disproportionately negative effect on charitable contributions. After all, people have to pay their state and local taxes, and many people are already in the middle of a long-term commitment to pay down their mortgage.

Opinion: Romney shakes up the race

For those households, there may be little room left under the cap to take deductions for charitable contributions. And, for all households, the cap would eliminate tax deductions for contributions larger than the cap, so large gifts to charities would automatically lose their tax-preferred status.

So, a cap is not a panacea, but it could well be one part of a constructive solution. Likewise, his acknowledgment that his earlier, disparaging comments about the 47% of households that do not pay federal income taxes were misguided suggests a reconsideration of the role taxes play in those households. If the journey of a thousand miles begins with a single step, Romney has finally taken the first step. But there is still much more work to be done.

Follow @CNNOpinion on Twitter

Join us at Facebook/CNNOpinion

The opinions expressed in this commentary are solely those of William Gale.

ADVERTISEMENT
Part of complete coverage on
updated 3:41 PM EDT, Wed July 30, 2014
Stuart Gitlow says pot is addictive and those who smoke it can experience long-term psychiatric disease.
updated 12:45 PM EDT, Wed July 30, 2014
Gabby Giffords and Katie Ray-Jones say "Between 2001 and 2012, more women were shot to death by an intimate partner in our country than the total number of American troops killed in the Iraq and Afghanistan wars combined."
updated 7:57 PM EDT, Tue July 29, 2014
Alan Elsner says Secretary Kerry's early cease-fire draft was leaked and presented as a final document, which served the interests of hard-liners on both sides who don't want the Gaza war to stop.
updated 7:58 AM EDT, Wed July 30, 2014
Vijay Das says Medicare is a success story that could provide health care for everybody, not just seniors
updated 2:18 PM EDT, Wed July 30, 2014
Rick Francona says Israel seems determined to render Hamas militarily ineffective.
updated 1:43 PM EDT, Wed July 30, 2014
S.E. Cupp says the entrepreneur and Dallas Mavericks owner thinks for himself and refuses to be confined to an ideological box.
updated 9:11 AM EDT, Wed July 30, 2014
A Christian group's anger over the trailer for "Black Jesus," an upcoming TV show, seems out of place, Jay Parini says
updated 4:28 PM EDT, Wed July 30, 2014
LZ Granderson says the cyber-standing ovation given to Robyn Lawley, an Australian plus-size model who posted unretouched photos, shows how crazy Americans' notions of beauty have become
updated 3:39 PM EDT, Wed July 30, 2014
Carol Dweck and Rachel Simmons: Girls tend to have a "fixed mindset" but they should have a "growth mindset."
updated 7:56 AM EDT, Mon July 28, 2014
A crisis like the Gaza conflict or the surge of immigrants can be an opportunity for a lame duck president, writes Julian Zelizer
updated 2:22 PM EDT, Sat July 26, 2014
Carol Costello says the league's light punishment sent the message that it didn't consider domestic violence a serious offense
updated 8:51 AM EDT, Mon July 28, 2014
Danny Cevallos says saggy pants aren't the kind of fashion statement protected by the First Amendment.
updated 2:52 PM EDT, Mon July 28, 2014
Margaret Hoover says some GOP legislators support a state's right to allow same-sex marriage and the right of churches, synagogues and mosques not to perform the sacrament
updated 2:31 PM EDT, Mon July 28, 2014
Megan McCracken and Jennifer Moreno say it's unacceptable for states to experiment with new execution procedures without full disclosure
updated 1:44 PM EDT, Wed July 30, 2014
Priya Satia says today's drones for bombardment and surveillance have their roots in the deadly history of Western aerial control of the Middle East that began in World War One
updated 12:35 PM EDT, Mon July 28, 2014
Jeff Yang says it's great to see the comics make an effort at diversifying the halls of justice
updated 11:55 AM EDT, Sat July 26, 2014
Rick Francona says the reported artillery firing from Russian territory is a sign Vladimir Putin has escalated the Ukraine battle
updated 2:22 PM EDT, Sun July 27, 2014
Paul Callan says the fact that appeals delay the death penalty doesn't make it an unconstitutional punishment, as one judge ruled
updated 6:25 PM EDT, Thu July 24, 2014
Pilot Robert Mark says it's been tough for the airline industry after the plane crashes in Ukraine and Taiwan.
updated 11:10 AM EDT, Fri July 25, 2014
Jennifer DeVoe laments efforts to end subsidies that allow working Americans to finally afford health insurance.
updated 11:33 AM EDT, Sat July 26, 2014
Ruti Teitel says assigning a costly and humiliating "collective guilt" to Germany after WWI would end up teaching the global community hard lessons about who to blame for war crimes
updated 8:45 AM EDT, Fri July 25, 2014
John Sutter responds to criticism of his column on the ethics of eating dog.
updated 9:02 AM EDT, Fri July 25, 2014
Frida Ghitis says it's tempting to ignore North Korea's antics as bluster but the cruel regime is dangerous.
updated 2:50 PM EDT, Fri July 25, 2014
To the question "Is Putin evil?" Alexander Motyl says he is evil enough for condemnation by people of good will.
updated 2:03 PM EDT, Thu July 24, 2014
Laurie Garrett: Poor governance, ignorance, hysteria worsen the Ebola epidemic in Sierra Leone, Guinea, Liberia.
updated 9:49 AM EDT, Thu July 24, 2014
Patrick Cronin and Kelley Sayler say the world is seeing nonstate groups such as Ukraine's rebels wielding more power to do harm than ever before
updated 6:05 PM EDT, Wed July 23, 2014
Ukraine ambassador Olexander Motsyk places blame for the MH17 tragedy squarely at the door of Russia
updated 7:42 AM EDT, Thu July 24, 2014
Mark Kramer says Russia and its proxies have a history of shooting down civilian aircraft, often with few repercussions
updated 2:53 PM EDT, Thu July 24, 2014
Les Abend says, with rockets flying over Tel Aviv and missiles shooting down MH17 over Ukraine, a commercial pilot's pre-flight checklist just got much more complicated
updated 9:17 AM EDT, Thu July 24, 2014
Mark Kramer says Russia and its proxies have a history of shooting down civilian aircraft, often with few repercussions
updated 12:37 PM EDT, Thu July 24, 2014
Gerard Jacobs says grieving families and nations need the comfort of traditional rituals to honor the remains of loved ones, particularly in a mass disaster
updated 10:13 AM EDT, Thu July 24, 2014
The idea is difficult to stomach, but John Sutter writes that eating dog is morally equivalent to eating pig, another intelligent animal. If Americans oppose it, they should question their own eating habits as well.
updated 12:30 PM EDT, Wed July 23, 2014
Bill van Esveld says under the laws of war, civilians who do not join in the fight are always to be protected. An International Criminal Court could rule on whether Israeli airstrikes and Hamas rocketing are war crimes.
updated 8:09 AM EDT, Wed July 30, 2014
Gordon Brown says the kidnapped Nigerian girls have been in captivity for 100 days, but the world has not forgotten them.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT