Joint Brad DeLong-Martin Feldstein Smackdown Watch: Another Interaction Effect Feldstein Misses That Makes It Even More Arithmetically Impossible for Romney to Keep His Promises
We are still waiting for the correction of the arithmetic error in Martin Feldstein's Wednesday Wall Street Journal op-ed.
Everybody is entitled to their own opinion, but not to their own facts--or to their own special rules of arithmetic.
And I missed this. Eliminate itemized deductions for the >$100K crowd, and you don't raise taxable income on a 2009 basis by $640B because they claim the standard deduction. The right number is not $640B but $450B, and multiply that by 24% and you get $108B--barely over half of the $191B that Feldstein had initially claimed.
Hoisted from Comments: Joint DeLong-Feldstein Smackdown Watch: klingedp said...
Another (huge) item missing in the analysis is that people who itemize deductions forgo the standard deduction. If you got rid of itemized deductions, those people would then take the standard deduction.
For my family (AGI over $100K) the change would be from itemized deductions of around $20K (since we have a very small mortgage)to a standard deduction of $11,600. I would assume the difference between itemized deductions and standard deductions would be larger at higher levels of income, primarily due to mortgage interest, but not considering the impact of the switch to standard deductions also overstates the tax revenue that could be produced. Unless, of course, Romney also expects to do away with the standard deductions too.