From Mitt Romney's closed-door fundraiser yesterday, courtesy of NBC:
"I'm going to probably eliminate for high income people the second home mortgage deduction," Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.
"By virtue of doing that, we'll get the same tax revenue, but we'll have lower rates," Romney explained.
Let's check Romney's arithmetic.
The home mortgage deduction was worth $22 billion to households making over $200,000 in 2009. Even if half of that was attributable to second houses -- and the actual figure is certainly less -- that gives you $11 billion. The deduction for state and local income taxes was worth $20 billion for those same households. So together you get a total of $31 billion.
The top 1 percent paid about 36 percent of individual income taxes in 2009, which were $915 billion. So they paid $329 billion in individual income taxes.
Even if we assume that all $31 billion in benefits from the deductions for interest on a second home and state and local taxes went to households in the top 1%--an unrealistic assumption, since the cutoff for the 1% is far above $200,000--that only brings their taxes up to $360 billion. Factor in the 20 percent across-the-board cut in rates that Romney has promised, and their taxes fall to $288 billion. Net, that's a $41 billion reduction. On top of that, you have to add Romney's proposed reduction in corporate income taxes, since the rich pay a large proportion of corporate income taxes, at least according to the Tax Policy Center and the CBO.
Republican tax cut plans fall into two categories: the ones that don't bother pretending that they're going to be revenue neutral and the ones that do. But the latter can never make the numbers add up because you can't have massive rate cuts and be revenue neutral unless you're willing to eliminate popular tax expenditures for the middle class, the preference for investment income (the most important tax break for the rich people who pay for Republican politicians' campaigns), or both.
This is the guy who's supposed to be the hard-headed businessman?
* The title is a reference to this Atlantic column, which shows that there just aren't enough tax expenditures to balance out the huge rate cuts that Romney has promised to the 1%.
James Kwak is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario. Read more from the Fiscal Affairs series here.