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Discussion: (5 comments)

  1. The study did what it intended to do, so in the immortal words of Aerosmith: “dream on, dream on, dream until your dreams come true…”

  2. Does the $90 billion treasury figure assume that existing tax exempt bonds will be grandfathered?

    1. Michael Stein

      I actually went through the .csv file linked to by the claim that ending the municipal bond and life insurance interest preferences would yield $90 billion. For 2013 (the first year that Romney could influence) every single bond interest preference I can find adds to $40.6 billion on personal returns plus $20.2 billion on corporate returns. The life insurance interest exclusion is $22.4 billion on personal and $1.7 billion on corporate. Ignoring the rather important facts that the TPC analysis was only talking about personal returns, not corporate, and that Romney also wants to reduce the corporate tax rate, a revenue loss not covered in the TPC analysis, I still come out $5 billion short of the $90 billion claimed above.

      So the answer is no – the $90 billion assumes no grandfathering. But the question of grandfathering of existing municipal bonds is very important. If they are not grandfathered, their value would drop significantly (in order to make their after-tax rate of return equal that of newly-issued bonds with a higher interest rate). This would harm balance sheets and generate capital losses for anyone selling them. This would offset some of the revenue gains from repealing the exclusion. If they are grandfathered, the actual revenue gain would be much less, because new bonds would make up only a fraction of the total interest income.

      Moreover, repealing the exclusion would increase the cost of borrowing for states and municipalities. This would result in state and local tax increases (offsetting some of the federal decreases) and/or state and local employment reductions, offsetting some of the job gains Romney claims for his policies.

      1. Michael Stein

        I may be in error above about the TPC analysis not regarding corporate taxes – I missed footnote 3 which indicates they allocated corporate tax cuts to individuals in proportion to their income from capital.

        Nonetheless, the point about only being able to achieve the savings by refusing to grandfather existing municipal bonds, and implications of such a refusal, stands.

  3. I’m sorry, but even redefining “high-income” as above $150,000 does not qualify as appearing “to be a transfer from rich to poor rather than the other way around”. It would best be described as a transfer from “Extremely wealthy” to just plain rich. I hate to let down all the politicians out there, but the term “middle-class” and the ACTUAL middle class are 2 completely different things.

    I grew up in what was considered (at least at the time) a normal middle class family. It would have been a DREAM COME TRUE for our family to have an income ANYWHERE EVEN CLOSE to $100,000 a year. As for the definition of “poor”? I suggest politicians in Washington take a trip out to Flint, Michigan and literally go door-to-door to talk to people who are (for the most part) nowhere near even a $50,000 a year income level. You go tell someone who is truly living in poverty that they can get a job paying $40,000 a year and they would be ecstatic!

    The reality of what the MAJORITY of people in this country face is not even REMOTELY close to being summarized in this or any other “tax plan”. Our elected officials need to come to terms with the fact that the majority of Americans are living in poverty, that the “middle-class” they speak of are the MINORITY and not the ones being “crushed”, it’s those Americans living in poverty who are being crushed by things like the price of gas. I don’t see how the “middle-class” Romney speaks of are being “crushed”. Any “middle-class” that meets the income level of $100K to $200K a year can EASILY afford gas, food, as well as their own healthcare (even if bought privately and not through their employer). They need to change the definition of income levels to accurately reflect the condition of this country.

    By the way, “oftentimes” is 2 words!

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