It’s kind of hard to explain what’s in Mitt’s tax plan, but he did drop some hints about what wanted to do in last night’s presidential debate — in between incredibly dishonest but plausible-sounding statements about everything else:
- He wants to put a cap of $25,000 on total deductions – so if you have a large mortgage deduction, that’s it.
- He wants to keep people who have savings from being taxed on them. But you’re not taxed on savings, you’re taxed on any interest they earn. Savings accounts are paying almost no interest now, so big whoop. But more to the point: Seriously, people still have savings? Talk about throwing us a bone!
- He says Obama wants bureaucrats telling people to use contraceptives. A Mormon nightmare, to be sure!
Capping deductions is nonsense. A more better approach (that sounds like something Ryan would say) would be to 1) exempt the first $40,000 of a persons income from income tax and 2) tax all income over $200,000 at 90%. That would go a long way in equalizing wealth and income in the United States.
Capping exemptions is the easy way out to avoid cutting exemptions directly. Since politicians can’t figure out how to cut any exemptions without raising a ruckus with their funders, it might be a pragmatic step forward.
If Congress really wanted to simplify taxes though, they have to eliminate the deductions. Make all income count as income (capital gains too, although even better charge double the tax rate for passive income earned before SS eligibility, and eliminate the cap on SS taxes). Allow everyone to file a one-page tax form like the 1040EZ. Online even. Eliminate the concept of an effective tax rate being different from the actual tax rate.
And yes, raise the threshold for the first income that is taxed and exponentially increase the rates from there. 90% of income over $200,000 will never happen (Congressional millionaires), but it’s a great idea.
In the “please mister can I have some more” department, the quid pro quo for giving us tax exemption on those minute interest increments on our checking is elimination of capital gains taxes.