Finding solutions: loopholes and lobbyists

One demand from many pundits is for specifics. The Tax Prof notes this regarding Romney’s tax deduction cap which he thinks is good tax policy and better politics. The source is a Wall Street Journal editorial. “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.

The problem for any politician is that closing any specific named loophole tends to fire up lobbyists that harass the politicians to open it back up again.

“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. …

WSJ ChartThe political left should have a hard time opposing this because reducing deductions would hit high-income taxpayers the hardest.” …

“Mr. Obama has also called for limiting tax deductions for high-income filers. His budgets have endorsed allowing them to take writeoffs at a rate of 28% instead of 35%. The big difference is that Mr. Romney wants to dedicate the revenue gain from capping deductions to cutting tax rates. Mr. Obama wants to use the money to pay for more spending.

The larger point is that Mr. Romney is serious about reform and has put on the table a serious idea for how to finance and achieve it. That’s far more than Mr. Obama has proposed about anything in a second term.”

Those pundits bashing Romney for not explaining advanced economic theory in a sound bite might do better to follow the Tax Prof’s example and report on what actually is rather than on some fantasy about what they think should be.

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