CTJ Analysis Shows That Millionaires Would Get Average Tax Cut of $250,000 Even If Deductions and Exclusions Are Limited to Zero
Today, presidential candidate and former Massachusetts Governor Mitt Romney suggested that one way to offset the cost of his proposed tax cuts would be to limit deductions to $17,000.
“As an option you could say everybody’s going to get up to a $17,000 deduction; and you could use your charitable deduction, your home mortgage deduction, or others – your healthcare deduction. And you can fill that bucket, if you will, that $17,000 bucket that way,” he said on a local Denver news show. “And higher income people might have a lower number.”
In September, Romney argued that he would eliminate enough deductions, exclusions and other special breaks to offset the costs of the new tax cuts he proposes, and that the net result would not be a tax increase for the middle-class or a tax cut for the rich.
But an August analysis from Citizens for Tax Justice demonstrated that even if itemized deductions and exclusions were eliminated entirely, people who make over $1 million would still see an average net tax break of $250,000 in 2013 under Romney’s plan.
That’s partly because the new tax breaks that Romney proposes are so generous to the rich that they would outweigh the loss of any deductions or exclusions. In addition to making permanent all the Bush tax cuts, Romney would reduce income tax rates by a fifth and eliminate the AMT and the estate tax.
Another reason is that Romney pledges to keep the special breaks that benefit the wealthy most of all — breaks for investment and savings like the special low rate for capital gains.
As a result, there is simply no way to Romney could fill in the details of his tax plan in a way that will not result in huge tax cuts for the very rich.
For low- and middle-income people, the loss of tax expenditures (tax deductions, exclusions, credits and other breaks) under Romney’s plan could outweigh any gains from the tax rate reductions and other new tax cuts, resulting in a net tax increase. In fact, this result is inevitable if Romney is to accomplish his goal of not further increasing the deficit while at the same time cutting taxes for millionaires by at least $250,000 on average.