Romney's deduction caps don't pay for tax cuts: study

U.S. Republican presidential nominee and former Massachusetts Governor Mitt Romney boards his campaign plane in Norfolk, Virginia, October 17, 2012.

WASHINGTON (Reuters) - Mitt Romney's proposed cap on itemizing tax deductions could not on its own raise enough new government tax revenue to compensate for revenues lost by the Republican presidential candidate's plan to slash income tax rates, a think tank said on Wednesday.

The Tax Policy Center, a nonpartisan group that has weighed in on other Romney proposals, said his deductions cap could raise up to $1.7 trillion over 10 years. The center said earlier this year Romney's 20-percent tax rate cut would cost $4.8 trillion.

The former Massachusetts governor has argued that his plan will not cost $4.8 trillion. At a debate on Tuesday with Democratic President Barack Obama, Romney reiterated that he would pay for his tax cut proposal by capping tax deductions by a set dollar amount. Taxpayers could choose their deductions under the cap, such as the home mortgage interest and charitable donation write-offs, among others, he said.

"I'm going to bring rates down across the board for everybody, but I'm going to limit deductions and exemptions and credits, particularly for people at the high end," Romney said at the debate in Hempstead, New York.

The Tax Policy Center acknowledged its latest estimates were based on an incomplete picture of Romney's tax plan.

"The Tax Policy Center has again inserted their own assumptions in order to reach a biased conclusion," a Romney campaign spokeswoman said on Wednesday.

The Romney campaign had previously criticized the Tax Policy Center's estimates, saying they did not account for economic growth that can pay for tax cuts and that the center excluded some tax breaks in their studies.

The campaign has said the limit on itemized deductions would be only part of its plan to fund the rate cut. For instance, it would also revamp the tax treatment of healthcare, which now comes in the form of an exclusion when health insurance is workplace-based.

Romney has shifted the dollar amount taxpayers might be able to deduct. "I'll pick a number - $25,000 of deductions and credits, and you can decide which ones to use," he said.

Romney earlier this month floated a cap on deductions set at $17,000. His campaign later said that proposal is one of a range of options. Romney has also said $50,000 could serve as the cap.

The higher the cap, the less money Romney's tax plan could raise to offset tax rate cuts, the center's estimates show.

A cap of $17,000 would raise $1.7 trillion over 10 years while the $50,000 cap would raise only $760 billion. If Romney eliminated all itemized deductions, his plan could raise $2 trillion over 10 years, the center has estimated.

Obama has called for a cap on itemized deductions of 28 percent of adjusted gross income for individuals earning more than $200,000 a year and families earning more than $250,000.

(Reporting by Patrick Temple-West and Kim Dixon; Editing by Kevin Drawbaugh)