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JCT on the Romney tax plan

oldfart

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The Romney campaign has pooh-poohed the Tax Policy Center analysis of the idea that rate reductions could be achieved in a revenue- neutral plan by curtailing unnamed deductions and other tax benefits. The Joint Committee on Taxation has now weighed in and their analysis is even grimmer. Their conclusion is that such a plan could only reduce rates (compared to the current law 15% to 39.6% for 2013 and later i.e. without the Bush rate cuts) by 4% as opposed to Romney's 20% goal. This would make the rate structure begin at 14.40% (from 15%) and end at 38.02% (instead of 39.6%).

Here are the assumptions and parameters of the model:
1. It is based on the standard economic model used by JCT and CBO to score tax and spending bills for effect on the deficit. This is more than a mere adding up of static numbers, it is the outcome of the same model to generate the figures used by both parties.

2. It assumes
----- the permanent repeal of the alternative minimum tax, PEP and Pease limitations,
----- the permanent elimination of all itemized deductions,
----- the permanent extension of current law provisions for the earned income tax credit and the child tax credit,
----- repeal of the interest exclusion on post-2012 state and municipal bonds,
----- taxing all dividends and capital gains at ordinary income rates,
----- reduce all marginal rates by 4%.

The model is relatively revenue-neutral over the period 2013--2022. Distributional effects are that the big winners would be taxpayers showing $50,000 or less of modified AGI (especially those with modified AGI between $10,000 and $ 20,000 who would see a tax reduction of 61.4%) and the big losers those whose modified AGI exceeds $100,000 (especially those whose modified AGI exceeds $1,000,000 who would see a tax increase of 7.1%). Those with modified AGI under $100,000 would see a reduction in taxes, with those with modified AGI seeing small increases (under 3%) except for millionaires.

If we take 2015 for a good out year to compare numbers, virtually all of the revenue increase is $215 billion from the elimination of all itemized deductions. Of this $68.4 billion is used to pay for repealing the AMT, $30.7 billion pays for repealing the PEP and Pease limitations, $71.5 to reduce marginal rates 4%, and $44.3 billion to extend the EITC and child credit. Net increase in revenue would be $4.1 billion.

So folks, it ain't gonna work. Lowering marginal rates anywhere near 20% will take a lot more than axing itemized deductions in their entirety.
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Freemason9

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Willard Romney will SO fuck us all, and make us all wear Magic Mormon Underwear.
 
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oldfart

oldfart

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Willard Romney will SO fuck us all, and make us all wear Magic Mormon Underwear.

Be careful about references to the magic underwear. It's supposed to be a secret, just like your temple name. Oops.
 

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