In response, Romney put forward a new tax plan in recent days suggesting that he might not raise taxes by eliminating specific deductions that are too popular to touch, but rather by capping all of a taxpayer's deductions by some amount. At first he put forward the hypothetical figure of $17,000 per taxpayer, but at the presidential debate on Tuesday he raised that number to $25,000.
In short, a taxpayer would add up all his deductions for charity, mortgage interest, state and local taxes, medical expenses and whatever else he or she is entitled to and if the amount is over whatever figure Romney has decided upon then the amount above that would not be deductible.
Taxpayers thinking they will get a tax cut from the Romney plan would be advised to check their tax returns first. According to data released earlier this year, taxpayers who declared between $50,000 and $100,000 of income in 2009, claimed, on average, $7,269 for medical expenses, $6,247 for taxes, $10,133 for interest and $2,775 for charitable contributions. That sums to $26,424 - well above both figures Romney has put forward.
Bruce's bottom line may be right, but there's something fishy about these numbers. Start with the fact that the median income for the whole country is at or around the bottom end of this bracket. That means that there are fewer people at, say, $90,000 than at, say, $60,000. So the average in this $50K to $100K bracket is likely to be no higher than $75K and most likely lower. Is it really plausible that the average taxpayer deduction is over $26K?
It gets fishier. Look at the medical deduction. To take that, you must have out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income and you can take only the portion that exceeds that 7.5%. Most people in this income bracket will, therefore, get a big fat zero for the medical deduction. It's highly implausible that the average is over $7,000. With all the zeros, I would expect the average to be under $2,000 and probably well under.
So I checked Bruce's data. The link is not to the IRS Statistics of Income, as I would have expected Bruce Bartlett, a tax expert, to use. No, they're from a Reuters' news story. I've contacted Bruce about this but haven't heard back.