“Suggesting limits on deductions was Governor Romney’s first public statement about how he might offset the revenue lost by cutting tax rates. Without more specifics, we can’t say how much revenue such limits would actually raise. 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,”
~Tax Policy Center 

The Tax Policy Center is completely non-partisan run by a Democrat and a Republican.  They’re highly, highly respected and are viewed without any perceived bias other than math and facts.  I’m saying that in advance because after this news breaks – Republicans will move to blame the ref here.  The Tax Policy Center has issued an updated report on Mitt Romney’s tax plan given his proposed changes to allow a $25,000 deduction cap for the wealthy.  Here is what they found in basic terms.

#1 -Romney’s plan to reduce income tax rates for everyone would cost $5 trillion.

#2 – If you eliminate every single deduction available – that would increase revenues by $2 trillion.

#3 – If you give a $25,000 deduction cap like Romney has proposed – there would no longer be a $2 trillion increase in revenues … it would now only be $1.3 trillion.

So – Romney’s plan to reduce income tax rates by $5 trillion and then offset those reductions by eliminating deductions with a $25,000 cap would add only $1.3 trillion back …. and thus – the government would be short revenues by $3.7 trillion what it is currently set to receive.  And Romney’s entire plan is predicated upon reducing the rates for the wealthiest families from 35% to 28%.  That’s the ENTIRE REASON for his tax plan.

But Romney has said that his tax plan would not add to the deficit.  The only way to square that is the increase in taxes Americans would pay due to the elimination of popular tax deductions.  So – if you own a home – you would no longer have a mortgage tax credit.  If you pay state and local taxes – those taxes are no longer tax deductible.

There are only two possible solutions …

Either you increase taxes on the middle class by $3.7 trillion over 10 years which means A LOT of money per middle class family or you increase the deficit by $3.7 trillion.  There is no other option.  Because – it is just math.  It’s mathematically impossible any other way.

The Hill shares the summary of the finding HERE:

Romney wants to lower all individual rates, cut the corporate rate from 35 percent to 25 percent, end the estate tax, end the Alternative Minimum Tax and eliminate capital gains taxes.

He has pledged to do this without adding to the deficit, without reducing the tax burden for the wealthy and without raising taxes on the middle class.

TPC has previously estimated that together these proposals reduce government revenue by $4 trillion on the individual side and another $1 trillion on the corporate side over 10 years. This does not count extending the Bush-era tax rates for the wealthy.

In a new analysis, TPC says that eliminating all itemized deductions would generate only $2 trillion, well short of paying for all the cuts.

A $25,000 cap raises even less revenue, only $1.3 trillion.

You can find the updated finding of the study HERE and the original study from the Tax Policy Center HERE.  In their original report – they wrote:

Also in the absence of such base broadening, TPC estimates that on a static basis, the Romney plan would lower federal tax liability by about $900 billion in calendar year 2015 compared with current law, roughly a 24 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be about $480 billion in calendar year 2015.

A reduction in federal revenues by 24%.  That’s some serious stuff.

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