LIMITING ITEMIZED DEDUCTIONS?

Ezra Klein’s WONKBLOG at the Washington Post website has reported that we now have “Tax Plan Specifics! From Mitt Romney!”.

Well, one possible specific.

“ABC News reports that Mitt Romney told Denver’s Fox affiliate that ‘one option’ he was considering to pay for his tax plan was to give everyone up to $17,000 in deductions, but no more than that.” 

Romney explained -

”You could use your charitable deduction, your home mortgage deduction, or others – your health-care deduction.  And you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number.”

This specific is not specific enough, and raises questions.

Would a married couple be limited to $17,000, but 2 single individuals living together be allowed a total of $34,000?  Or would the limit be $17,000 for Single, Married Filing Separate, and Head of Household and $34,000 for Married Filing Joint?

Would the choices of what you can use to “fill your bucket” be reduced, or would all current deductions, under current law, be available?  Would other deductions and benefits currently allowed elsewhere now be available only as itemized deductions subject to the limitation?

I don’t like this idea.  If we are going to continue to allow itemized deductions under a simpler Tax Code, then the deductions that remain will do so for a purpose.  And if a deduction is worth keeping it should not be limited.

Obviously some currently allowed itemized deductions would not be continued in the new simpler Tax Code – perhaps those for taxes and mortgage interest on properties other than one’s primary principal residence.  

Besides, the problem with inappropriate “tax expenditures” that create “tax non-payers” lie more in adjustments to income and tax credits then they do with itemized deductions.

This idea just adds more complexity to the Tax Code, especially as Romney has hinted that "higher income people might have a lower number”, suggesting additional AGI-based limitations.  We don't need more complexity - we need simplicity.

At least it shows that Mitt is thinking about tax reform.

TTFN