GOP presidential nominee Mitt Romney and his campaign have started to get specific about how he might pay for his signature 20 percent cut in tax rates, and his latest idea is sure to create both winners and losers.
Romney floated a $17,000 cap on itemized tax deductions in a local television interview Monday night as one option to pay for his plan. Establishing a cap would limit how much taxpayers could deduct from such popular tax breaks as mortgage interest, charitable donations and state and local taxes.
A Romney policy aide said there would be two other pieces to the tax reform option: adjustments to personal exemptions and a separate cap on the exclusion of employer-provided health care insurance from income.
That health care tax break is a particularly fast-growing and expensive one, and has been targeted by both parties.
The Romney aide said the three caps could be adjusted to ensure that middle-class families - in the aggregate - don't see higher taxes. But the aide acknowledged that some in the middle class could pay more.
"There could be folks in certain circumstances who see a rise instead of a fall. ... I can't make any pledge to the person sitting next to me how tax reform will impact any particular individual," the aide said.
That's in part because Romney hasn't settled on any one plan and has said he'd have to work out the details with Congress.
"There's nothing in stone," the Romney aide said.
Of course, any big tax reform plan necessarily creates winners and losers - even if the overall economy and the country as a whole benefit. Indeed, critics say Romney's latest trial balloon would still result in a net tax cut for many wealthy people while increasing taxes on some middle-class earners.
President Barack Obama's campaign quickly seized on the new details from Romney, pointing out that millions of families making less than $200,000 would blow through that $17,000 cap with mortgage interest alone, citing IRS figures.
"After months of failing to explain how he could make his $5 trillion tax plan add up, Governor Romney has finally admitted that middle-class tax breaks are on the table," the Obama campaign said in a statement. "He said that he might cap deductions at $17,000 - meaning he would limit the charitable, home mortgage, health care and other deductions to that amount. It's a new idea but, just like the many other ways Romney has described his tax plan, it would raise taxes for millions of middle-class families."
The Romney campaign said the Obama camp mistakenly included the health deduction in its figures - which it would limit separately.
Romney's plan looks similar to one Sen. Pat Toomey (R-Pa.) proposed last year during the failed super committee's deficit reduction talks. Harvard economist Martin Feldstein also proposed the idea recently. The advantage, both noted, is that by setting an overall cap instead of wading through each individual deduction, lawmakers could try and blunt opposition.
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