"We're in need of a tax panacea,
And I'm hearing that Romney,
The GOP nom'nee,
Has floated a clever idea."
"Mr. Romney proposes to cap
Those deductions it's too hard to scrap,
To bolster his case
Of broad'ning the base
While constricting the deficit gap."
"Though a limit of 17G
Balanced budgets will not guarantee,
I'm glad to see some
This heretofore vague nominee."
On the day before his first debate with Pres. Barack Obama, Mitt Romney introduced an intriguing(*) new element into the campaign with a proposal to cap personal income tax deductions at $17,000. Among the blognoscenti and twitterati, the electrified reaction was: "Tax specifics from Mitt Romney? Stuff just got real!" The concept is simple, but elegant: Romney would like to lower tax rates while broadening the base, by eliminating deductions, exemptions, credits, etc. Since each of those tax expenditures comes with a constituency that will fight to keep it, one simply sidesteps those fights by keeping all the loopholes, but limiting one's capacity to use them. In Romney's own words: "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."
Now, as Josh Barro explains in Bloomberg, even a simple and elegant proposal has the devil in the details. Moreover, it's likely that this cap will not be enough to pay for the across-the-board 20% tax cut that Mr. Romney wants. However, as we chew over this interesting new idea, it pays to remember that the perfect should never be the enemy of the good.
(*)As always, I am required to disclose that the use of the word "intriguing" signifies a good idea from someone with whom I generally disagree.