The Real Mitt Romney

[BigV]

Originally Posted by Flint

The way I understood it is because the rate is lower.

this is the core problem I have understanding Romney's tax plan. He says reduce rates, reduce deductions, revenue neutral. Where is this "more money" coming from?

[Flint]

Originally Posted by BigV

this is the core problem I have understanding Romney's tax plan. He says reduce rates, reduce deductions, revenue neutral. Where is this "more money" coming from?

A. The rate is a rate of income being taxed, so when you reduce rates there is more money left to individuals as income, and less money received by the government as taxes.

B. Deductions are (in effect) a method of giving money back, so when you reduce deductions, there is less money received by individuals as returns, and more money recieved by the government as taxes.

Whereas A. and B. have opposite effects, the net effect is neutral (theoretcially--I'm not arguing feasability, just describing a simple flowchart), meaning no change. Neutral doesn't mean more.



I'm still struggling to identify the area which is difficult to understand.

[xoxoxoBruce]

Neutral? Then what's the point?
When you make $50,000, your mortgage deduction is a very big deal.
When you make $50 million, not so much.

[Flint]

Originally Posted by xoxoxoBruce

Neutral? Then what's the point?

Good question. The point, as I understand it (and insomuch as this is a valid theory) is that since tax rates have gone down, business has been stimulated. Tax revenues have gone up, beause of the increase in commerce. But individuals are paying the same amount, since rate and deduction changes have offset each other.

Keep in mind, all I am responding to is the comment that Romney's tax plan is incomprehensible. I don't think it is.

[BigV]

Originally Posted by Flint

snip--

Keep in mind, all I am responding to is the comment that Romney's tax plan is incomprehensible. I don't think it is.

I know you're talking, we are all talking about Romney's plan, not Flint's political philosophies.

Romney's tax plan is NOT incomprehensible. Romney's tax plan is arithmetically impossible.

He's said things that taken together are contradictory--they can not all exist at the same time.

A guy walks up to a pretty girl at the club. "You're gorgeous! Let's go back to my place and I'll f*ck your brains out. I promise I'll respect you in the morning. Don't worry, your virginity will remain intact."

Not all can happen.

Romney's promised to reduce tax rates (by 20%).

Romney's promise to eliminate deductions by an equal amount (undefined--vagueness prevents precise calculations, so estimates are used).

Romney's promised to keep proportion of taxes paid by taxpayers in top 5% the same (60%).

Romney's promised to reduce the amount of taxes paid by the middle class ($200,000/year income).

Romney's promised to reduce the deficit (no amount given that I could find).

How can all of these be managed? No one has produced an explanation that provides room for all these promises.

What I take from this is that Romney tells the audience he's in front of the thing they want to hear. Fine, they all do that. But as the audiences change, the main story changes. Also fine, different people can have different high priorities. However, Romney's just the one guy, and if he's elected, he can only do one thing, produce one net result, and when the statements are incompatible, something's going to get broken. What promise will be broken?

[BigV]

Originally Posted by Flint

A. The rate is a rate of income being taxed, so when you reduce rates there is more money left to individuals as income, and less money received by the government as taxes.

B. Deductions are (in effect) a method of giving money back, so when you reduce deductions, there is less money received by individuals as returns, and more money recieved by the government as taxes.

Whereas A. and B. have opposite effects, the net effect is neutral (theoretcially--I'm not arguing feasability, just describing a simple flowchart), meaning no change. Neutral doesn't mean more.



I'm still struggling to identify the area which is difficult to understand.

deductions reduce the amount of income that is subject to taxation. a deduction is an amount of money you've spent during the year on a given thing(s). If those things fall into certain categories, the amount spent can be deducted from your gross income, repeat as necessary, until you get to your adjusted gross income, the amount that is subject to taxation. deductions are like exemptions, a certain kind and amount of income is exempted from taxation.

more deductions, more exemptions, more money excluded from taxation, and for a given rate of taxation, less tax collected.

by eliminating deductions, fewer deductions, fewer exemptions, less money excluded from taxation, for a given rate of taxation, more tax collected.

***

Originally Posted by Flint

The way I understood him to be explaining it in the debate:

1. Reduce ‘individual’ tax rate
...a. Individuals in households pay less
...b. Individuals who own small businesses pay less
2. Tax revenues decreased at this point
3. Small businesses stimulated at this point
...a. Resulting in tax revenues going back up
4. Also, deductions eliminated for households
...a. Households end up paying the same amount

So. "Neutral doesn't mean more", neutral is neutral, ok, ok. Then where does *this* more money (in the pockets of people) come from?

Romney's said he'd reduce the tax rate. He's said he'd eliminate deductions to make the change revenue neutral. How is this going to make it possible for people to pay less in taxes?

What is it? Is it paying less in taxes or is it revenue neutral?

[Lamplighter]

Romney's said he'd reduce the tax rate.
He's said he'd eliminate deductions to make the change revenue neutral.
How is this going to make it possible for people to pay less in taxes?

Revenue neutral may mean (for Romney) the total $ of revenue stays the same.

So if an upper part of the middle class pays less:
---(e.g., no taxes on stock dividends, interest income, capital gains,
no taxes on estates handed down to family members, etc.)

and bottom half pays more:
---(e.g., loss of deductions for home mortage, charity, education, etc.)

to Romney, if the $ amount remains the same, this is "revenue neutral"...

But for those in the bottom half, somehow it doesn't quite feel that way.

[Stormieweather]

Well, "revenue neutral" means changing the tax structure so that the revenue stream for the government remains unchanged. If Romney will not raise taxes on the wealthy, the only other option is to raise them on the non-wealthy.

Sounded to me, last night, like he is trying to claim that he isn't "raising taxes" on the non-wealthy, instead, he's eliminating loopholes.

Same effect on your take-home pay, if you are non-wealthy.