Obama beware: Romney's tax plan is a moving target

The president is a busy man, and James Fallows warns us that presidents often don't have time to prepare adequately for debates. If I could, I would warn the president that Romney in recent days may have nominally eased himself out of the tax reform trap he set himself, as exposed by the Tax Policy Center. If Obama claims that Romney proposes to raise taxes on the middle class, Romney will protest that he's proposed no such thing, and may be able to offer enough 'specifics' to at least seem to rebut the charge.

TPC, you will recall, demonstrated decisively that it's mathematically impossible to a) cut marginal tax rates 20%, b) add new no new taxes on investment income, and c) make the rate cuts revenue neutral by closing or reducing "tax loopholes" without d) raising taxes on middle and lower-income taxpayers (which Romney has promised not to do).

Martin Feldstein offered Romney an out by arguing that it would be barely possible to meet these parameters -- if "middle class" was defined as annual income under $100k per year -- by capping the total deductions of each taxpayer earning more than that threshold, rather than by picking and choosing among specific deductions to end or limit. Such a cap would sock it to those earning $100-200k.  But Romney waved this help away by insisting  that "middle class" meant anyone earning less than $200k, as Obama has defined it (foolishly, to my mind).

In the last few days, however, Romney has suggested, that a) if something's got to give, he would cut marginal rates by less than 20%; b) that he would adopt something akin to Feldstein's approach, capping total deductions per person, and c) that those caps could be higher for higher income earners.

Thus the outlines of a way to reduce rates, reduce loopholes, maintain revenue neutrality and not raise taxes on the middle class emerge: 1) cut the top rate less than 20%; 2) cap deductions more severely for those earning over $200k than for those earning less; and 3) cap deductions for everybody else over a certain income threshold.

Of course, cutting the top rate less than 20% violates Romney's original parameters and proves TPC right. And capping deductions rather than reducing the deductions available doesn't really simplify the tax code; it's a kind of AMT on steroids. And Romney, if he were serious about tax reform, could save everyone a lot of mental gymnastics by laying out an actual plan with actual specific proposals, as Feldstein did.

Still, Romney has opened up some wiggle room for himself.