Dem politicians and the MSM are complaining endlessly that Romney’s tax plan won’t work, and are incessantly demanding that he provide them with details.
Mitt has explained his plan in general details: eliminating some loopholes, capping or ending some popular deductions, and lowering the overall tax rates. He describes his plan as revenue neutral, and correctly states that the details are to be worked out with the Congress. But the bleated demands continue, a constant drumbeat in the campaign.
So let’s talk briefly about popular deductions, and revenue neutrality.
Neutrality means that ideally the total revenue raised under the new tax code will be the same as before. IOW, it’s NOT a tax increase. However, some will pay more, often much more, and some will pay less. It’s just a question of whose ox gets gored.
Any change to the ability to deduct mortgage interest and charitable contributions will impact taxpayers all across the country, depending on their incomes.
But eliminate say, the deduction for state and local income taxes, and boy oh boy, that’s a whole ‘nother kettle of fish.
Consider the bluest of the blue states..California, NY, NJ, Mass. CT, Maryland. And let’s not forget the District of Columbia. All hock full of very wealthy and highly paid individuals. Eliminate their ability to deduct the state and local income taxes they pay, and, in the immortal words of Sen. Everett Dirksen, “you’re talking about serious money here.”
Take a typical Wall Street type, or a Silicon Valley bigwig, who might easily be paying $500,000 in state and local taxes. If that deduction goes away, that’s an instant $150,000 hit to the wallet.
And if Romney goes further, and caps the deduction for real estate taxes and/or means tests it, well..there’s another $50k down the tube.
Even in Virginia, which may revert to Red this year, there’s a 5.75% rate on income over $17,000. So Chris Matthews might have to pony up an extra $150k.
All those highly paid liberal, packed into a few states. It’s a target rich environment.