Saturday, October 20, 2012

Tax Policy -- Romney Has One, Obama Has A Whiny Complaint

The biggest advantage of Mitt Romney's tax plan is that he has one, unlike his opponent, who seems to be running a campaign in favor of Big Bird and against "binders of women."  The Wall Street Journal actually discusses something substantive -- namely, the deduction cap.  Elizabeth Price Foley over at Instapundit makes a good point about it...
It would operate essentially as a cafeteria plan, where taxpayers get a certain maximum dollar amount of deductions– say, $17,000– and then are allowed to select from a variety of deductions up to the maximum amount.  
This is brilliant because it allows each taxpayer to take those deductions he needs/wants the most. For those who own expensive homes or multiple homes, they could use the mortgage interest deduction (up to the maximum limit). For others– perhaps those who rent–other deductions would be prioritized, such as those for student loans, medical expenses, or business expenses.
I haven't spent much time thinking about that or the other major point she mentions -- that the cap and cafeteria style element would end the battle among lobbyists over which deductions to preserve whenever tax reform efforts are initiated. They're all preserved, but with a cap and a simpler, flatter code. The only people who might object would be tax lawyers.

It's amazing how much flak Romney is taking right now when he actually has an idea that will accomplish something, whereas the other guy seems to be obsessed with raising tax rates on "the rich" and little else. Obama keeps criticizing Romney's tax plan on two grounds: it will blow up the deficit, and it's not fair because "the rich" don't pay enough.   The first is silly coming from a guy who's run four trillion dollar deficits in succession, as Romney noted last Tuesday; it's even more ridiculous when we consider that Obama's suggested contributions to tax policy would barely dent the deficit, and that's under a static analysis that assumes tax hikes won't stunt economic growth.

But it's the fairness point that's most nutty.  It's the cry of a child, not an adult, to invoke "fairness" when it comes to tax policy.  How fair is it that I need to pay more money into the system simply because I make more than someone else?  The basis for tax policy should revolve around figuring out ways to raise more revenue while encouraging more productive economic activity by taxpayers.  Of course, a guy who thinks it's worth raising the capital gains tax rate even if it would generate less revenue probably doesn't care -- it's all about class warfare to him.

Whish is why he shouldn't be President much longer...

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