Mitt Romney claims he intends to pay for his across-the-board 20 percent tax cut by eliminating special deductions and loopholes, but according to a study conducted by the Joint Committee on Taxation, eliminating all itemized deductions would only pay for a 4 percent tax cut.
via Bloomberg
Repealing all itemized deductions in the U.S. tax code would pay for only a 4 percent cut in income tax rates, according to an estimate from the nonpartisan scorekeeper for Congress that casts doubt on Republicans’ ability to finance lower income-tax rates with base broadening.
The analysis by the Joint Committee on Taxation shows the arithmetical difficulty of an approach that assumes long-favored tax breaks such as deductions for mortgage interest and charitable contributions could be repealed instantly and completely. Republican presidential nominee Mitt Romney proposes a 20 percent income-tax cut and says he would pay for it by limiting tax deductions, credits and exemptions.
If you take Romney at his word, in theory this wouldn't even cover 4 percent of his tax cut. Why? Because Romney himself has said on the campaign trail, and during the first presidential debate, that he would not end deductions for mortgages.
The Joint Committee's findings state that further broadening of the tax base to pay for more than 4 percent of Romney's $5 trillion tax cut would have to include employer-sponsored health insurance, the earned income tax credit, and the child tax credit.
In other words, you would necessarily have to raise taxes on working families to pay for even a portion of it.
This study from the Joint Committee on Taxation confirms the Obama campaign's charge that Romney would raise taxes on the middle class to pay for his give-away to the wealthy. The only other alternative would be to forgo paying for it and explode the deficit, which is what Republican administrations have ordinarily done in the past.
It should not be forgotten that George W. Bush's tax cuts were never paid for either, and that was only a 3 percent tax cut. Bush's 3 percent tax cut is the largest driver of our current budget deficit. Mitt Romney is proposing a 20 percent tax cut.
A 20 percent, across-the-board tax cut would obliterate the treasury.