Why does Paul Ryan (R-WI) Hate America, The Paul Ryan Budget’s Tax Cuts, Nearly $6 Trillion in Cost and No Plausible Way to Pay for It
The new budget from House Budget Committee Chairman Paul Ryan proposes a series of dramatic tax cuts that would cost nearly $6 trillion in lost federal revenue over the next decade (see Figure 1), and that would provide the lion’s share of their benefits to high-income households and corporations. But, despite its stated promise to the contrary, the budget does not include a plausible way to pay for it all.
The budget sets a goal of cutting the top individual tax rate to 25 percent (from 39.6 percent) and it would repeal the Alternative Minimum Tax (AMT), which is designed to ensure that high-income people pay at least a minimum level of tax. It would cut the corporate tax rate to 25 percent (from 35 percent) and greatly cut taxes on corporations’ foreign profits. It also would repeal all of the revenue-raising measures of health reform (i.e., the Affordable Care Act or ACA), which are designed to help offset the cost of that law’s health insurance coverage expansions.
Estimates from the Urban-Brookings Tax Policy Center (TPC) show those tax cuts would cost the federal government nearly $6 trillion over the next decade, which exceeds the Ryan budget’s total spending cuts, exclusive of its interest savings. These tax cuts would provide extremely large new tax cuts to wealthy Americans, even as Chairman Ryan’s spending cuts would fall disproportionately on the most vulnerable individuals and families.[1]
Chairman Ryan offers no proposals to offset the nearly $6 trillion in costs. He only links to a tax reform framework from House Ways and Means Committee Chairman Dave Camp, which mentions “scaling back tax preferences that distort economic behavior” but provides no details on how to do so.[2] The Ryan budget does not identify a single deduction, credit, exclusion, or other preference to narrow or close.
Nor is his vow to raise $6 trillion by scaling back tax expenditures plausible, given that the most costly of them, such as the mortgage interest deduction and deduction for charitable giving, tend to be the most politically popular. As a result, if policymakers were to cut taxes enough to meet Chairman Ryan’s goal, they would likely add to deficits, undercutting Chairman Ryan’s claim to balance the budget within a decade.
If, on the other hand, policymakers truly sought to offset the full $6 trillion in costs by scaling back tax expenditures, they could only do so by increasing taxes on households with incomes below $200,000. When the TPC analyzed a similar plan from Governor Romney — which would have cut the top income-tax rate from 35 to 28 percent — it found that even after dramatically scaling back tax expenditures for filers with incomes above $200,000, Romney’s plan would still have provided large net tax cuts to those households. To pay for these tax cuts without adding to the deficit, TPC estimated that families with children and with incomes below $200,000 would have faced tax increases of about $2,000 per family, on average.
The tax cuts that Chairman Ryan seeks are substantially larger than Governor Romney’s, with a goal of cutting the top rate from 39.6 to 25 percent. Without any cuts to tax expenditures, reaching the Ryan budget’s goal of a 25 percent top rate while abolishing the AMT and repealing the Affordable Care Act’s revenue-raising measures would result in tax cuts worth an average of about $330,000 a year to households with incomes of more than $1 million a year; the tax cuts for high-income filers would necessarily be larger under Ryan’s plan than under Romney’s.[3] As explained below, even with the same dramatic scaling back of tax expenditures for filers with incomes above $200,000 that TPC examined in its Romney analysis — including entirely wiping out their deductions for mortgage interest and charitable giving — families with children that have incomes below $200,000 would have to face tax increases averaging more than $3,000 a year, if policymakers were to avoid increasing the deficit while reaching Chairman Ryan’s 25-percent top-tax-rate goal.
