The further to the left or the right you move, the more your lens on life distorts.

Sunday, October 21, 2012


Two of Barack Obama's criticisms of Mitt Romney's tax restructuring plan is that it will "increase taxes on the middle class by $6,000 per year" (absolute nonsense) and that it will "take away" much loved tax deductions (see the following). Typically, Obama can only envision big government that dictates to its citizens, rather than allowing them options and choices.

The Wall Street Journal comments on a rather interesting proposal that Mitt Romney made during the past debate:
The Obama campaign and the press corps keep demanding that Mitt Romney specify which tax deductions he’d eliminate, but the Republican has already proposed more tax-reform specificity than any candidate in memory. To wit, he’s proposed a dollar limit on deductions for each tax filer…. The idea may be even better politically. The historic challenge for tax reformers is defeating the most powerful lobbies in Washington that exist to preserve their special tax privileges. … This is one reason President Obama wants Mr. Romney to be more specific: The minute he proposed to limit the mortgage-interest deduction, the housing lobby would do the Obama campaign’s bidding by running ads against Mr. Romney’s plan. Mr. Romney is right not to fall for this sucker play. By limiting the amount of deductions that any individual tax filer can take, Mr. Romney is avoiding this lobby-by-lobby warfare.
In essence, Romney showed more political acumen in one sentence that Barack Obama has shown in four years. Rather than eliminating deductions in what would result in a partisan political mine field, Romney would simply cap all deductions at some number ($17,000 was proposed), thereby allowing each taxpayer the ability to choose those deductions that are most important. Since middle income taxpayers don't typically take $17,000 in deductions, they would be unaffected, but their tax rate would be reduced. Upper income taxpayers would be affected, thereby keeping the net amount they pay in taxes at about the same level, even though rates would be reduced for all.

Glen Reynolds, the conservative blogger at Instapundit, summarized:
Romney’s plan to lower tax rates while simultaneously capping deductions is truly brilliant, though little understood. 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.

Not only is this cafeteria-style plan individually customizable and flexible, it avoids the nasty politics typically associated with any attempt to reform deductions. In all other reform efforts, special interests/lobbyists have screamed about the consequences of reducing or eliminating their own deductions. Romney’s cafeteria approach avoids these screaming fests, for the simple reason that no existing deduction would be targeted for reduction or elimination.

It is a win, win approach for everyone. Brilliant.
Of course, Obama and his legion of media advocates have conveniently ignored this element of a common-sense approach to tax reform. After all, it's so much more satisfying to continue to promote the canard that Romney will reduce taxes for "the rich." and doesn't care about the middle class.

Barack Obama and his supporters obsess about increasing the taxes on "millionaires and billionaires" and use this ploy as the center piece (well, actually, it's the only piece) of his efforts to reduce a $1 trillion deficit, improve a 44-month record of horrid unemployment statistics, and "build the recovery from the middle out (whatever that means)." The fact that it will do none of those things and will likely drive us into a second recession is irrelevant. After all, it's all about "social justice."

At the same time, Obama rants about Mitt Romney's plan and suggests that the math doesn't work. If there's one person who should't lecture us on math, it's Barack Obama. Using his "math," $1 trillion dollar deficits are now the new normal.

And what about Barack Obama's tax restructuring plan? He. Doesn't. Have. One. But that should come as no surprise, because when you're moving "forward," you really don't need a plan. Only hope and change.