Take my deductions -- PLEASE!
October 2, 2012 11:05 AM   Subscribe

Does Romney want to remove deductions for 401k to help pay for his 20% "across the board" tax cut?

I know that the Romney campaign has been vague about which "loopholes" that they want to close, but Romney's economic advisor, Kevin Hassett, seems to have clear ideas about what those are and has voiced them (at least prior to coming aboard team Romney). Along with getting rid of mortgage interest deductions, he (Hassett) also wants to remove 401k deductions. What I'm confused about is does he mean that he doesn't want them to be tax deferred any longer, or that he doesn't want the deductions to be pre-tax, or both, or is there something else I'm missing?

I've already made my decision about Romney, but Mrs. Junkie is still sorting through the candidates positions and I want make sure she has the correct information to help make her decision.
posted by bionic.junkie to Law & Government (9 answers total) 2 users marked this as a favorite

I don't think campaign promises count as "correct information." It's SOP for any politician to say whatever they need to get elected, and assume most voters won't remember later anyway. It's been a winning strategy for years. If you really want insight into what he will do as President, look at what he did as Governor of Massachusetts. People his age really don't change that much. If he paid for tax cuts by screwing with retirement plans there, it's safe to assume he'll try the same thing again on the Federal level.
posted by COD at 11:53 AM on October 2, 2012 [2 favorites]

If you really want insight into what he will do as President, look at what he did as Governor of Massachusetts.

I'd say his tenure in Massachusetts would be the best-case scenario. He's had to tie himself far closer to the extremists in his party this time, and I'm pretty certain they will hold-sway in terms of what drek comes out of Congress, should Romney take the White House. I really can't see him being much better than a rubber stamp for them.
posted by Thorzdad at 12:22 PM on October 2, 2012 [1 favorite]

Romney today suggested a uniform cap on itemized deductions per individual taxpayer at around $17,000.
"As an option you could say everybody's going to get up to a $17,000 deduction; and you could use your charitable deduction, your home mortgage deduction, or others – your healthcare deduction. And you can fill that bucket, if you will, that $17,000 bucket that way," he said during a visit with Denver's FOX31. "And higher income people might have a lower number."
posted by BobbyVan at 12:31 PM on October 2, 2012

The assumption (of keeping deductions) by the tax policy center authors seems to go against (unless I'm misunderstanding) what Hassett has said in the past regarding 401k deductions.

Hassett, apparently along with other economists, want to remove 401k deductions. When I was reading Hassett's thoughts on 401k deductions I wasn't sure if he meant making them not tax deferred and pushing that tax revenue into the general fund now, instead of when I draw at retirement, or if he would not have no longer be a pre-tax deduction and count against my gross income total (the way medicare and social security is currently taxed). Or maybe he means something else entirely and I'm missing the obvious.

On preview: BobbyVan's link to the deduction bucket that was proposed today pretty much makes the removal of all deductions a certainty.
posted by bionic.junkie at 12:48 PM on October 2, 2012

I wouldn't say removal of all deductions is a certainty... but it's likely that Romney would seriously consider a cap on deductions to offset the cost of the proposed cuts in marginal rates.
posted by BobbyVan at 12:52 PM on October 2, 2012

Hassett, apparently along with other economists, want to remove 401k deductions.

Hassett also said last week (to other economists) that he assumed the tax cut would be scaled down to remain revenue neutral if the "loopholes" were insufficient; the Romney campaign immediately tried to dispel that. So I think it's a mistake to assume that Hassett's more radical ideas on deductions are being embraced by the Romney campaign, let alone the Congresscritters who'd get final say on any tax proposals.

The "bucket of deductions" idea is new today, and its "could" and "might" doesn't exactly dispel the underpants-gnominess of the entire plan.
posted by holgate at 1:02 PM on October 2, 2012 [1 favorite]

Don't forget that the President, while having a lot of persuasive ability, still does not make the decisions. The Congress is the "decider". My prediction is that, regardless of who is in the White House, there will not be an amendment to deny the deduction for 401k contributions.

When Congress wants to limit those deductions, it decreases the maximums. It does not simply abrogate the deduction.
posted by yclipse at 6:56 PM on October 2, 2012

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