|"Only dull people are brilliant at breakfast"
|"The liberal soul shall be made fat, and he that watereth, shall be watered also himself."
-- Proverbs 11:25
The Roadmap for America’s Future, which Rep. Paul Ryan (R-WI) — the ranking Republican on the House Budget Committee — released in late January, calls for radical policy changes that would result in a massive transfer of resources from the broad majority of Americans to the nation’s wealthiest individuals.
The Roadmap would give the most affluent households a new round of very large, costly tax cuts by reducing income tax rates on high-income households; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax. At the same time, the Ryan plan would raise taxes for most middle-income families, privatize a substantial portion of Social Security, eliminate the tax exclusion for employer-sponsored health insurance, end traditional Medicare and most of Medicaid, and terminate the Children’s Health Insurance Program. The plan would replace these health programs with a system of vouchers whose value would erode over time and thus would purchase health insurance that would cover fewer health care services as the years went by.
The tax cuts for those at the very top would be of historic proportions. A new analysis by the Urban Institute-Brookings Institution Tax Policy Center (TPC) finds:
- The Ryan plan would cut in half the taxes of the richest 1 percent of Americans — those with incomes exceeding $633,000 (in 2009 dollars) in 2014.
- The higher one goes up the income scale, the more massive the tax cuts would be. Households with incomes of more than $1 million would receive an average annual tax cut of $502,000.
- The richest one-tenth of 1 percent of Americans — those whose incomes exceed $2.9 million a year — would receive an average tax cut of $1.7 million a year. These tax cuts would be on top of those that high-income households would get from making the Bush tax cuts, which are due to expire at the end of 2010, permanent.
To offset some of the cost of these massive tax cuts, the Ryan plan would place a new consumption tax on most goods and services, a measure that would increase taxes on most low- and middle-income families. TPC finds that:
- About three-quarters of Americans — those with incomes between $20,000 and $200,000 — would face tax increases. For example, households with incomes between $50,000 and $75,000 would face an average tax increase of $900. (These estimated changes in taxes are relative to the taxes that would be paid under a continuation of current policy — i.e., what tax liabilities would be if the President and Congress make permanent the expiring 2001 and 2003 tax cuts and relief from the alternative minimum tax.)
- The plan would shift tax burdens so substantially from the wealthy to the middle class that people with incomes over $1 million would face much lower effective tax rates than middle-income families would. That is, they would pay much smaller percentages of their income in federal taxes.
Because of the Ryan plan’s enormous tax cuts for the affluent, even the very large benefit cuts that the plan would make in Medicare, Medicaid, and Social Security — and the plan’s middle-class tax increases — would not put the federal budget on a sustainable course for decades. The federal debt would soar to about 175 percent of the gross domestic product (GDP) by 2050. In contrast, most fiscal policy analysts recommend that the debt-to-GDP ratio be stabilized within the next ten years, and at a far lower level.
Reports of Plan’s Fiscal Soundness Rest on Misunderstanding of CBO Analysis
Assertions that the Ryan plan is fiscally responsible rest on a serious misunderstanding of a Congressional Budget Office (CBO) analysis of the plan. CBO only partially analyzed the Ryan plan. Contrary to some media reports, CBO has not prepared an actual cost estimate of it.  CBO generally does not produce estimates of the effects of proposed changes in tax policies; that is the responsibility of the Joint Committee on Taxation. In its analysis of the Ryan plan, CBO did not attempt to measure the revenue losses that Rep. Ryan’s proposals would generate.
Instead, as its report states, CBO simply used an assumption specified by Rep. Ryan’s staff that the overall level of revenues would remain unchanged from what the federal government would collect through 2030 under current policies, and would equal 19 percent of GDP in later years. CBO did not find that the Ryan plan actually would achieve these assumed revenue levels. (For commentary by Howard Gleckman of the Tax Policy Center on the widespread misunderstanding of the CBO analysis, see the box below.)
The reality is different; TPC finds that the Ryan plan would result in very large revenue losses relative to current policies. TPC estimates that even with its middle-class tax increases, the plan would reduce federal revenues to 16 percent of GDP in 2014. Because the tax cuts for the wealthy would dwarf the tax increases for the middle class, the Ryan plan would allow the federal debt to continue growing for a number of decades to come, despite its steep cuts in Medicare, Medicaid, and Social Security.
Labels: Greedy Republican Bastards