Article of the day link: and I think I know why it took him so long.
So Mr Romney (and Mr Ryan) have both received a lot, and I mean a lot, of criticism for failing to fully detail their tax plan. We all know that they’re planning a rate cut. But the second part about “eliminating deductions and such”, “to make the tax plan position tax neutral”, well that’s been a little less detailed.
And every Obama supporter worth his salt has trumpeted accusations of “can’t even do the simple math”.
It’s because, well, having read some of the plan that was released yesterday – it’s just not that simple. And as to how simple the Americans need the math to be, I refer you to the summarised results of the OECD survey of math literacy*.
As I understand it, the American Federal tax system works in one of two ways. Based on your income group, age and family size, you can claim a standard deduction from your taxable income. But, if higher, you also have the option of claiming “itemized deductions“, which means that you can detail the permissible deductions that apply to you.
Mr Romney suggests a three-pronged cap to the deductions. That is, you can claim as many itemized deductions as you want, but they will, in total, be subject to an overall maximum. And there will be three caps: one each for deductions**, exemptions***, and health-care exclusion.
And seeing as, in Mr Romney’s own words, about 46/47/49% of Americans don’t pay income tax – how are they going to know what the difference is between a standard deduction and an itemised deduction; between a deduction and an exemption?
I think it’s quite clever. Raising taxes makes no sense if you leave the backdoor gaping open. You have to start by closing the tax-code holes. It just makes your whole collection process more effective.
Of course, Obama also wants to put in some caps. And pair these with tax increases. But he only wants them to apply to high-income earners…
*Just so we’re clear, America came 31st. Followed swiftly by Portugal, Greece, Italy, and countries with no discernible public schooling systems.
**Allowable expenses that you can claim to offset your taxable income.
***Income that gets excluded from your taxable income (ie. tax-free income).