Capping itemized tax deductions at $25,000 would generate $1.3 trillion, covering about 32 percent of the cost of Mitt Romney’s proposed income tax cuts for individuals, the nonpartisan Tax Policy Center said today.
The Republican presidential nominee has suggested a deduction cap as one option to offset the effect of his proposal to cut tax rates by 20 percent and repeal the estate tax and alternative minimum tax. During a debate last night with President Barack Obama, Romney suggested a $25,000 limit, which he said would apply to deductions and credits.
“Without more specifics, we can’t say how much revenue such limits would actually raise,” Roberton Williams, a senior fellow at the Washington-based center, said in a blog post. “But these new estimates suggest that Romney will need to do much more than capping itemized deductions to pay for the roughly $5 trillion in rate cuts and other tax benefits he has proposed.”
About $1 trillion of Romney’s tax cuts come from cutting the corporate tax rate to 25 percent from 35 percent. That’s separate from the tax cuts for individuals.
The analysis doesn’t provide a complete estimate of Romney’s tax plan because he hasn’t fully detailed it. The analysis also doesn’t address credits, which would be considered in some unspecified way under Romney’s suggested cap.
The deduction cap would be part of a three-pronged approach that would include separate limits on personal exemptions and the exclusion of employer-provided health insurance from income. The largest itemized deductions are those for charitable contributions, mortgage interest and state and local taxes.
Romney and Obama have been sparring over whether the Republican’s tax plan would fall substantially short of offsetting the revenue cuts it calls for.
“Nothing in the TPC’s brief note changes the conclusions of the seven independent studies that have concluded that Governor Romney’s tax reform proposals are both achievable and likely to lead to stronger economic growth,” Amanda Henneberg, a spokeswoman for the campaign, said in an e-mailed statement.
“The choice is clear between $2 trillion in higher taxes under President Obama or a pro-growth tax reform under Governor Romney that will lead to 7 million new jobs over the next 10 years,” she said.