Reply to Mitt Romney's tax increase on Northern Virginians

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[quote=Anonymous]Ok, so Virginia is in play. And the GOP message is Obama will raise your taxes.

Then Romney comes along with this:

http://politicalticker.blogs.cnn.com/2012/10/03/romney-suggests-17000-cap-on-tax-deductions/

I've been doing back-of-the-envelope. All assumptions below are based on married filing jointly.

Say you have a HHI of $200,000. Mortgage interest and property taxes amount to $36,000 a year. You donate another $4,000 a year to taxes and deduct another $10,000 in state income taxes. That's $50,000 worth of federal deductions (assume for the moment that the AMT doesn't apply). That reduces your taxable income to $150,000, solidly in the 28% tax bracket. Your tax deductions save you $14,000 in taxes.

Now, Romney's going to disallow $33,000 of your tax deductions. The represents a tax increase of $9,240 before you take into account the 20% reduction in the rates he proposes.

The 20% cut in rates saves you $5,417.46 in taxes on your first $139,350 of taxable income.

Your next $43,650 of income will now be taxed at Romney's new marginal rate of 22.4% (instead of 28%). That's $9,777 in tax compared to $12,222, a difference of $2,445.

Which means if I'm calculating this correctly, Romney just proposed a tax increase worth $1,378 on this kind of taxpayer ($9,240 tax increase due to the limited deduction minus the $5,417 + $2,445 in savings due to cuts in the rates).

Not exactly sure how this compares to Obama. And, there are other factors to consider (AMT patches, etc.)[/quote]

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