Romney didn't say anything about property and income taxes in his $17,000 bucket proposal. The tax proposers always conveniently forget to mention the property and state and local income tax deductions. Those of us old enough to remember know which deductions we lost under the Reagan tax cuts.
Before the Reagan Tax cuts you could also itemize state sales taxes (now it's an either or - income taxes or sales taxes deduction), gasoline taxes, interest on credit cards and also interest on consumer loans. There was also a Schedule G. This was where you could average your income over I believe a 2-5 year period. So if you had one really good year and the rest were mediocre you could achieve a minor tax savings.
But we were all sold on lower tax rates and we gave up those particular tax deductions. Guess what? The tax rates went back up and no one restored the lost deductions. Well the republicans are back at it again proposing lower tax rates but give up your deductions for property taxes, state and local income taxes, mortgage interest, and charitable deductions.
When you are super wealthy these deductions don't really matter. But the vast majority of taxpayer itemizers are in the $100,000 - $300,000 brackets. That's where any change in deductions or tax rates has the biggest impact revenue wise. If you want to raise tax revenues simply take the deductions away from the middle class. A lower tax rate does not compensate for the lost deductions.
Personally, I would have higher tax rates and keep the deductions. Why? It's math. If you have a 30% tax rate than your deduction is worth 30 cents on the dollar. You reduce the tax rate and your deduction also reduces by the same percentage. Currently, for most taxpayers the AMT provisions already cap your deductions so that you at least pay an effective tax rate of 20%. That's true for those of us who have earned income like salaries and wages. But in Romney world when your income is mostly capital gains you can have an effective tax rate of less than 20%. And for those 1%ers it's still not enough. They want to reduce their tax rates even further. And to get there they will destroy the middle class.
Mortgage interest deductions foster home ownership. Property taxes pay for our schools and state and local income taxes pay for our roads and infrastructure. These are all worthy goals in a society. Call it social engineering but the use of the tax code does in a positive way promote our communities. The other side would argue that their tax proposals promote capital formation. But it's a one sided argument. They are only looking at the income side that is taxed. If a business invests then they get to take a depreciation expense deduction. That is a worthy deduction. That is real capital formation. They are converting cash to assets that generate jobs and profits. Similiarly, individual taxpayers invest in their communities with home ownership, schools, and roads with their property tax, income tax, and mortgage interest deductions. But all income whether it be from wages, interest, dividends, or capital gains should be taxed at the same rates. That's what Ronald Reagan believed.