- Increase the cigarette tax from $1.01 per pack to $1.95
- Cap itemized deducations at 28% of income
- Cap IRA's at $3 million per person (the "Romney rule")
- The "Buffet Rule", a minimum income tax of 30% on incomes over $400,000, no matter how the money is earned
You remember that guy in high school who kept asking that one girl to prom, even though she said no every single year? That’s the Obama administration on capping itemized deductions. This has been in every single one of their budgets since they came into office. It hasn’t passed. But they keep trying. They just love it that much. It’s also the policy that nets them most of their revenue. And while it hasn’t cleared Congress yet, it also makes political sense.
“Everybody runs around this town saying I’m for broadening the base and lowering the rates, but they’re terrified to identify particular loopholes,” says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who formerly served as Vice President Joe Biden’s chief economist. “The deduction cap gets around that by proportionately whacking everything. It’s an efficient way of broadening the base without invoking specific interest group rage.”
Which isn’t to say there’ll be no rage. About 90 percent of the itemized deductions richer taxpayers take are for charitable contributions, the mortgage-interest deduction, or the state and local tax deduction. So this tax change will act as a cap on subsidies for these three activities.