Mitt Romney barely had a chance to talk up his new tax reform plan in Wednesday night's debate, what with all the scintillating talk of earmarks and Arlen Specter. But he wasn't exactly looking for an opening to promote it either. And this is surely because Romney is in a tough spot when it comes to taxes. On the one hand, he's got people on his right—the Wall Street Journal editorial page, for one —urging him to make an aggressive "pro-growth" tax reform plan the animating cause of a campaign that sorely needs one. On the other hand, he knows he's going to get hammered in the general election over his own taxes—the 14 percent rate he pays on his $20 million-per-year income. As it was, his existing tax proposals—which many conservatives consider milquetoast —would lower taxes on the 1 percent by $82,000.
So what to do? Well, it looks like Romney has decided to thread the needle by ... adopting the centerpiece of Barack Obama's own tax proposals. Yes, you heard that right, and I'm surprised this hasn't been more commented on yet. Since Obama took office, his lone major tax reform proposal, beyond letting the Bush tax cuts on the wealthy lapse, has been to limit the deductions that wealthy taxpayers claim on their taxes. As it stands, many high-income taxpayers get a much larger break for charitable giving or the mortgage interest deduction than do middle-income taxpayers because high earners (or at least those whose income is taxed at ordinary income rates, unlike Romney) pay higher marginal tax rates, which means their deductions are worth more—if you're taxed at a 35 percent rate, a $10,000 deduction will save you $3,500, but only $1,500 if you're paying at a 15 percent rate. Obama proposed reducing the size of the break for wealthy taxpayers—not equalizing it across income levels, mind, just reducing it. It was his main proposal in early 2009 for raising revenue to help pay for universal health care, and he's rolled it out every year since. He makes a quite passionate case for it, arguing that it's a simple matter of fairness that the breaks in the tax code should not be weighted to the wealthiest. But it's gone nowhere, even when the Democrats controlled Congress. For one thing, some traditional Democratic allies vehemently opposed it from the outset: charities, foundations and universities that rely on big donations from the wealthy, and who worried that rich folks would give them less if they got less of a tax break for it. As I wrote in 2010, the higher ed industry spent a lot of money lobbying against the idea, and snuffed it in the crib.
And now here is Romney proposing pretty much the same thing—to limit the deductions that the "top 1 percent" can claim. (Yes, his team is really adopting the Occupy definitions.) The context is of course entirely different in his case, the intent is not to raise additional revenue, but to allow him to slash income tax rates by 20 percent, including rates on the top brackets, in a way that he says will be revenue neutral and stimulative. It remains to be seen whether this claim comes anywhere close to adding up, and whom it will benefit most. But it's obvious what the political target is—to be seen as promoting a supply-side tax plan (lowering rates) while also appearing to stick it just a bit to people like him.
Except there's the thing—the plan doesn't really touch people like him at all. Because it leaves undisturbed the preferential treatment for capital gains, which are taxed at 15 percent and which make up virtually all of Romney's income, but for his measly $360,000 in speaking fees. And depending on how the deduction reforms are written, those may not tweak him at all either, since he's not being taxed at high marginal rates. So take this plan as what it is, a placeholder vessel meant to carry Romney through a rocky strait. And appreciate the irony that the man who will save us from Barack Obama's secret mission to turn us into social-democratic Europe has now taken his new tax idea from Obama's playbook.