by Stephen Entin
October 15, 2012
Governor Romney has proposed to fund a portion of his tax package by limiting itemized deductions, suggesting a $17,000 cap as a talking point. This could reduce concerns (largely unfounded) that the tax plan is not sufficiently progressive, or that it would otherwise require raising taxes on the middle class. In short, the plan is nearly revenue neutral. It illustrates that the tax package can indeed be made to work without raising taxes on middle income families (except in rare cases). Nonetheless, this is a bit of a blunt instrument which does not address the merits or demerits of the different types of deductions. It is also not clear whether Congress will go along with major reductions in some types of the deductions involved. A series of spending reductions in the least valuable or most wasteful federal spending programs might be a better way to proceed.