Paul Ryan’s Plan for Budget Reform: I’m Forgainst It?
If you’re the highly suggestible type, like I am — or so I’ve beentold, and I totally believe it — an election year can leave your head spinning. Both sides of the partisan equation make compelling arguments, and when you don’t blindly toe a party line, sifting through the rhetoric in search of the truth can be a daunting task.
Take, for example, the recent budget proposal fronted by House Republican Paul Ryan, discussed here. To quickly summarize, Ryan’s plan would produce a 10-year deficit of $3.13 trillion, less than half the amount to be complied under President Obama’s budget. It accomplishes this despite making sweeping tax cuts, including reducing the top individual and corporate tax rates to 25%. So if tax revenue is presumably going down, how does the deficit shrink under Ryan’s plan? By dramatically reducing government spending, with much of the cuts aimed at Medicare and other “safety net” programs.
Is Ryan’s plan a “good” thing for America? Hell if I know, because quite frankly, I’ve spent the past three decades so wrapped up in a Chuck Klosterman-like obsession with sports and music, I’ve failed to gain any semblance of an understanding of the inner workings of the government. But I will say this: if you’re willing to read arguments from both sides without any preconceived partisan leanings, they both sound pretty damn convincing.
If you don’t believe me, check out these dueling point/counter-point columns regarding Ryan’s proposed tax reform published on Forbes this week.
The first, authored by Peter Ferrara, lauds Ryan’s plan as forward-thinking, with Ferrara opining, “…the plan would help produce millions of new jobs, and the restoration of traditional American prosperity.”
Published one day later, Howard Gleckman’s column takes the polar opposite view of the Republican proposal, deriding it as “more big tax cuts for the rich.”
So who’s right? You decide.
From Ferrara:
Unlike President Obama, Paul Ryan in this budget shows the leadership to propose both sweeping tax reform and sweeping entitlement reform. Instead of raising tax rates as Obama has proposed, and indeed already enacted under current law, Ryan proposes to consolidate the current 6 individual income tax rates, ranging up to 35%, to just two rates of 10% and 25%.
President Obama, by contrast, is already raising the top marginal tax rate at least to 45%, even without any of the new tax increases he has proposed. Ryan has indicated the 10% rate would apply to families making less than $100,000 per year, with the 25% rate applying to families making over that, with sharply increased personal exemptions ensuring no tax increase for anyone from current law. But the actual parameters would be finalized based on what is necessary to make the reform revenue neutral.
Even with all of those tax reductions, federal revenues under Ryan’s budget would nearly double by 2022 compared to 2012. But federal taxes would still be $3.27 trillion less over the next 10 years than projected under President Obama’s budget. This reflects the basic truth that America suffers from soaring federal deficits and debt not because we are taxed too little, but rather because the government spends too much.
From Gleckman:
No surprise here, but the tax cuts in Paul Ryan’s 2013 budget plan would result in huge benefits for high-income people and very modest—or no— benefits for low income working households, according to a new analysis by the Tax Policy Center.
TPC looked only at the tax reductions in Ryan’s plan, which also included offsetting–but unidentified–cuts in tax credits, exclusions, and deductions. TPC found that in 2015, relative to today’s tax system, those making $1 million or more would enjoy an average tax cut of $265,000 and see their after-tax income increase by 12.5 percent. By contrast, half of those making between $20,000 and $30,000 would get no tax cut at all. On average, people in that income group would get a tax reduction of $129. Ryan would raise their after-tax income by 0.5 percent.
Nearly all middle-income households (those making between $50,000 and $75,000) would see their taxes fall, by an average of roughly $1,000. Ryan would increase their after-tax income by about 2 percent.
In truth, unless Republicans raise taxes on capital gains and dividends, it is hard to imagine the highest income households getting anything other than a windfall from this budget. Other tax preferences, such as the mortgage interest deduction, are just not that valuable to them.
And since no high-profile Republicans want to raise taxes on gains and dividends (and many would cut investment taxes even further) this budget would likely result in a huge tax cut for those who need it least. That’s not a great way to start an exercise whose stated goal is to eliminate the budget deficit
