TUESDAY night on the fading dowager of cable news that is CNN, Wolf Blitzer asked Mitt Romney about his tax proposals. What specific deductions did Mr Romney propose to eliminate in order to finance his promise to cut income-tax rates by 20%, Mr Blitzer asked? Home mortgage interest? Charitable donations? No, Mr Romney said, he'd keep those. So how would he limit deductions? Would he institute an overall deductions cap of $17,000, as he's vaguely mentioned on the campaign trail? Well, Mr Romney said, a cap might be possible; it could be $25,000, it could be $50,000. (He appears to have backed away from the $17,000 figure.) "Would that add up to the $4.8 or $5 trillion it's been estimated your comprehensive tax reductions would cost?" asked Mr Blitzer. Well, Mr Romney replied, that $5 trillion number is wrong, because it doesn't take into account the elimination of deductions. "The president's charge of a $5 trillion tax cut is obviously inaccurate and wrong because what he says is, all right, let's look at all the rates you're lowering, and then he ignores the fact that I also say we're also going to limit deductions and credits and exemptions."

You see what he just did there, right? If the United States were a publicly-traded company and Mitt Romney were its CEO, and if that interview had been a conference call with analysts, shares in USA Inc would have dropped 5% in the subsequent minute. What Mr Blitzer asked was: do your proposed revenue enhancements fully compensate for your proposed $5 trillion in revenue cuts? And Mr Romney answered that it won't really be $5 trillion in cuts, because of the enhancements. Mr Romney is not mathematically illiterate; he's a former CEO who is very used to answering pointed questions about numbers. He understood what Mr Blitzer asked. His response is an acknowledgment that he can't make his numbers add up, so he's hiding behind a smokescreen of feigned incomprehension. The deduction caps can't make up for the tax cuts he's proposing. Either some of those cuts won't happen, or the deficit will go up.

We knew this, of course. Capping deductions can't make up for a 20% across-the-board rate cut, a corporate tax cut from 35% to 25%, eliminating the alternative minimum tax and the estate tax, and the other cuts Mr Romney wants. The same calculations the Tax Policy Center (TPC) made in August still hold. Suzy Khimm points us to the TPC's calculations of how much tax-deductible income is out there for Mr Romney to harvest in order to finance his cuts. (Brian Beutler has a nicer version of the charts.) On average, people in the top population quintile took $37,673 in deductions in 2011, while those in the second quintile took $19,671; tax units in lower quintiles rarely took more than $17,000 in deductions. There are 22.6m tax units in the top quintile, and 26m tax units in the second quintile. That means capping deductions at $17,000 would give you an extra $539 billion in income each year that would be taxable rather than exempt, with the lion's share ($469 billion) from the top quintile. The cut-off income for the top quintile is about $100,000 per year, so under Mr Romney's proposed lower tax rates, most of that income would be taxed at either 22.4% or 26.4%; let's call the average rate 25%. That gives you about $135 billion in additional revenue, which is nowhere near enough to offset the $480 billion per year in 2015 that Mr Romney's cuts would cost. It can't even make up for the 20% rate cuts; federal revenue from personal-income tax was $1.09 trillion in 2011, meaning a 20% across-the-board rate cut would cost $202 billion. And Mr Romney isn't really even proposing to cap deductions at $17,000. He's now talking about $25,000 or $50,000, which would further slash the revenue he can expect to get. William Gale, who co-authored the TPC study, compares the debate so far to an attempt by Mr Romney to claim that he can drive from New York to Los Angeles in 15 hours without breaking the speed limit.
