Fresh out of the gate after basically gaining the Republican nomination for president, Mitt Romney has reportedly been mulling over the possibility of ending second-home mortgage deductions for wealthy people as part of a tax-reform proposal.?But unless Romney's idea is part of comprehensive tax reform and reduction, it could do more harm than good.?The real-estate market has been hammered now for five straight years, with no recovery in sight. Many people, wealthy as well as folks in the middle, buy a second home to rent it out and earn extra income.
It's also not such a bad idea for college and retirement savings. Eliminating the second mortgage deduction, even if just for the wealthy, would reduce the value of those homes. That would affect the whole real-estate market, as most other homes would decline in value.
Romney's staff said his statement was made at a private meeting — and he was just throwing out ideas. That may be true, but he has a good chance at being the next president.
Romney has put forth some decent ideas: He wants to cut everybody's tax rates by 20 percent — dropping the top tax rate to 28 percent from 35 percent. But even as part of a comprehensive reform, the tax code would be made more complex with a two-tiered tax system on second homes: allowing it for the middle-class, but not the wealthy. We don't need even more tax forms.
Moreover, although comprehensive tax reform is needed, what's needed in the near term as the economy continues to stagnate is a quick shot of adrenaline in the form of sharp cuts in tax rates. And the tax cuts should be permanent, unlike the 2003 Bush tax cuts, which nowadays have had to be renewed a couple of times a year, casting a pall of uncertainty across business and personal budgets.
A good plan would be to follow the 1981 tax cuts of President Reagan, whom Romney and all other modern Republicans profess to admire. The Gipper campaigned on a platform of major cuts, and delivered once in office as the top marginal tax rate was slashed to 50 percent from 70 percent. The key was the 1981 cuts that undergirded more than two decades of prosperity until the recent uncertainty and stagnation.
Obama, of course, is running a campaign of envy against "the rich" — also known as business owners, investors and jobs creators making over $250,000.?
Romney, as the challenger, needs to solidify his position as a disciplined, Reaganesque tax cutter — and stay away from comments that can be used to characterize him as a candidate who throws out unformed ideas like daisies on a pond.
REPRINTED FROM THE NEW BERN SUN JOURNAL