Ryan's Mystery Meat Budget

By :: March 20th, 2012

I am weary of mystery meat.  The latest serving was dished out today by House Budget Committee Chairman Paul Ryan (R-WI), who released a fiscal plan that airily promises both trillions of dollars in tax cuts and a nearly balanced budget within a decade, but never says how he’d get there.

Ryan isn’t saying that his budget implies cuts of $4.6 trillion in popular tax deductions, credits, and exclusions over 10 years, according to new estimates by the Tax Policy Center. And that ignores the $5.4 trillion in revenue lost from permanently extending the 2001/2003 tax cuts.  

Ryan proposes big, specific spending reductions such as cutting Medicaid in half and slashing other federal spending (except for Social Security, Medicare, and Medicaid) by nearly 75 percent from current levels by 2050. But his budget still can’t add up without eliminating or sharply scaling back those popular tax preferences. Which ones, it seems, remain a state secret.  

Ryan rolled out a 2013 budget that promises to replace the current individual rate structure with just two rates-- 10 percent and 25 percent. He’d repeal the Alternative Minimum Tax and abolish the tax increases included in the 2010 health law. For business, he’d lower the corporate tax rate from 35 percent to 25 percent and shift to a territorial tax system, where multinationals would owe no U.S. tax on foreign earnings.

All of this would reduce tax revenues by trillions of dollars over 10 years. The Tax Policy Center estimates that a similar corporate rate cut, AMT repeal, and a two-rate individual system would reduce revenues by about $4.5 trillion through 2022, even after accounting for the $5.4 trillion cost of extending the 2001/2003 tax cuts. In 2022 alone, a Ryan-like plan would reduce revenues by about $600 billion.

To put it another way, TPC figures such a tax package would generate revenues of about 15.8 percent of Gross Domestic Product in 2022. His budget aims to collect about 18.7 percent. That means he'd have to find about $700 billion in new revenues by cutting tax preferences.   

Keep in mind that TPC did not model the actual Ryan plan, since it is not specific enough to estimate. Instead, we looked at a plan with the elements of his proposal.          

But the rough numbers are stark. And Ryan, who knows better, studiously avoids naming names when it comes to eliminating tax preferences. Oh, his budget includes a convincing and articulate explanation about what’s wrong with a tax system with high rates and a narrow base. He just doesn’t say what he’d do about it.

There is a disquieting echo here of President Obama, who so recently did such a great job explaining what’s wrong with our corporate tax system. The president happily proposed a politically popular cut in corporate rates to 28 percent, but identified offsetting tax increases that would cover only a fraction of the cost.

All of the major GOP presidential candidates have played the same black box game—promising huge rate cuts without ever saying how they’d pay for them.

Ryan asserts there is “an emerging bipartisan consensus for tax reform that lowers rates, broadens the tax base, and promotes growth and job creation.” Actually, he’s wrong. There is an emerging bipartisan consensus to embrace lower rates without ever saying how to pay for them.

 

 

34Comments

  1. Michael Bindner  ::  5:43 pm on March 20th, 2012:

    This is just for show. With the Budget Control Act, his committee is largely irrelevant – as it should be. His Medicaid proposals are a non-starter, because they would hurt current seniors who need nursing home care and the Tea Party would never allow them to go through, nor would AARP. The Medicare proposals he lays out are incoherent, because they include repealing Obamacare. The only way premiu…um support works is if both mandates and pre-existing condition reforms in the law remain in place.

    The only tax change that will pass is a grand bargain at 28%, not 25%. That 3% is the difference between structural balance and ever expanding debt. Obama holds all the cards, since he can get the same level of revenue, and then some, by vetoing any extension of the Bush tax cuts. If Grover Norquist and the leadership don’t get the inevitability of more revenue, the donors who will be paying it certainly do, provided they believe that Obama won’t geek on extending the Bush cuts.

    The conflict is all for electoral show. Once all the congressional primaries have been held, a deal will be reached because GOP donors want it that way, unless they already know Obama will geek on extending temporary tax cuts (in which case we might as well all vote for Romney).

  2. Michael Bindner  ::  5:46 pm on March 20th, 2012:

    Saying any tax reform that eliminates all the tax expenditures also eliminates the AMT is a bit of a misnomer. Essentially, such proposals eliminate the entire tax code and replace it with an AMT that everyone pays.

  3. AMTbuff  ::  7:03 pm on March 20th, 2012:

    That 3% is the difference between structural balance and ever expanding debt.

    Structural balance? Look at the long-term trajectory of entitlement spending. There can be no structural balance at ANY level of revenues, not even at 100% of GDP. Entitlement spending needs to be capped as a fraction of GDP. Then the revenue level needs to be set to fund that cap. A 28% tax rate is a long, long distance from the rate that will be needed.

  4. AMTbuff  ::  7:09 pm on March 20th, 2012:

    Ryan rolled out a 2013 budget that promises to replace the current individual rate structure with just two rates– 10 percent and 25 percent

    My guess: If this plan ever becomes a bill, it will include a 35% rate bubble analogous to the one in the 1986 Tax Reform. The rate bubble will just happen to encompass the entire upper middle class, which is where most of the nation’s income is earned.

    Just like Obamacare or any other major proposal, headline promises are negated by the fine print. Ironically, the proponents of a plan are the most likely to be surprised by these claw-backs: Opponents are more likely to inspect the details and discover the traps.

  5. estate evaluation  ::  2:39 am on March 21st, 2012:

    Sound promising, but i really wonder if they can make this work even through economic fluctuations.

  6. Morning Must Reads: Coalescing | Swampland | TIME.com  ::  8:50 am on March 21st, 2012:

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  7. Paul Ryan’s path to nowhere  ::  9:54 am on March 21st, 2012:

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  8. John de Waal  ::  5:40 pm on March 21st, 2012:

    The Republicans seem to figure that, whenever the budget falls short, they can always make up for it by cutting social programs. The poor and disenfranchised have no idea how to fight back.
    As to tax reform, why don’t we eliminate all taxes except the one on income and on imports.
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  22. Paul Ryan’s Revenue Reforms Slash Taxes on the Rich | Government Market  ::  2:31 pm on April 17th, 2012:

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  25. Ryan’s Budget: The Most Fraudulent Proposal in American History | FavStocks  ::  4:10 am on August 12th, 2012:

    […] many middle-class families.) So what are we to make of this proposal? Mr. Gleckman calls it a “mystery meat budget,” but he’s being unfair to mystery meat. … So the Ryan budget is a fraud; Mr. Ryan talks […]

  26. Ryan’s Budget: The Most Fraudulent Proposal in American History | Get Money Out Of Politics  ::  10:28 am on August 12th, 2012:

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  27. Randians of the World Unite! « provangelical  ::  5:05 pm on August 12th, 2012:

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  28. Ryan’s Budget: The Most Fraudulent Proposal in American History « Flexible Reality  ::  6:05 pm on August 13th, 2012:

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  29. Let’s Necklace Romney With Ryan’s Economic Plan!  ::  5:47 pm on August 15th, 2012:

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  30. What's In The Ryan Plan? – NYTimes.com  ::  4:58 am on August 16th, 2012:

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  31. Krugman: What’s In The Ryan Plan? « GusGus  ::  10:15 am on August 17th, 2012:

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