What the Tax Policy Center Really Said About the Ryan Budget

By :: March 19th, 2013

The political response to the Tax Policy Center’s analysis of House Budget Committee chairman Paul Ryan’s (R-WI) fiscal plan was predictable, and mostly based on caricatures of what TPC actually concluded.

To review: TPC found that tax cuts similar to those described in the committee’s plan would add $5.7 trillion to the budget deficit over the next decade. Republicans responded by suggesting we came up with these numbers while “smoking something.” Democrats concluded that TPC proved the GOP plan would raise taxes on the middle-class by trillions of dollars.

To our GOP critics, I am fairly sure our modelers were not under the influence of illicit drugs while running the Ryan budget. I can’t say for sure, but they mostly prefer to hang out in the gym.

To the Democrats who so enthusiastically embraced our analysis, thank you for your support.  However, we did not say what you wish we had said.  

To start, TPC did not analyze any specific tax proposal because the House budget does not include one. Instead, we analyzed the outlines of the tax cuts it endorsed—individual tax rates of 10 percent and 25 percent, a corporate rate of 25 percent, and repeal of the Alternative Minimum Tax and the tax hikes included in President Obama’s 2010 health law.   

While the House budget promises to offset the entire cost of those tax cuts, it says very little about how it would do that, beyond a vow to “simplify” the revenue code. Our tax model is very sophisticated and our modelers very smart, but analyzing “simplify” is well beyond their abilities. Thus, we did not attempt to measure promised, but non-existent, revenue increases.

We did show that the tax cuts in the proposal are heavily skewed to high-income taxpayers. Fifty-five percent of the tax savings would go to the highest-income 1 percent of households, who make $574,000 and up. Thus, House Republicans will find it very difficult to offset the cost of those tax cuts while maintaining the current level of progressivity.

And that was really the key message that I took from the TPC numbers: By promising deep rate cuts without adding to the deficit, the GOP has set for itself a nearly impossible task.

Think of it like this: The Ryan tax cuts would dig a $5.7 trillion hole in the budget. House Republicans now have several options as they confront that self-made pit.  

  • They could make the hole smaller by scaling back the promised tax cuts. Ryan and House Ways & Means Committee chair Dave Camp (R-MI) seem to recognize this possibility by calling the proposed rate schedule a “goal.”
  • They could cut spending more deeply to help pay for the tax cuts.
  • They could add to the deficit.
  • They could do what the Democrats allege: Scale back tax preferences in such a way that middle-income households pay higher taxes than they do today while high-income people enjoy a tax cut. After all, the current distribution of the tax code is not written on stone tablets. Of course, the idea that either Obama or congressional Democrats would go along with this is a fantasy.       
  • Finally, the House GOP could pay for these tax cuts by eliminating tax preferences in a way that is both revenue- and distributionally-neutral. This would be very, very tough. It would require them to slash popular deductions for charitable giving and state and local tax payments. And it would require the GOP to raise taxes on investment income—something the party has opposed for years. But nothing stops them from trying.

In sum, TPC described the size and nature of the hole the House GOP has dug for itself. It will now be up to the House itself to figure out what to do with it.

 

14Comments

  1. Vivian Darkbloom  ::  3:58 pm on March 19th, 2013:

    Howard,

    This is completely disingenuous. As I predicted in a comment to your earlier post, a predictable segment of the media is distorting that earlier column (which as itself a distortion) by calling the proposal a “massive tax cut”. I also wrote that the TPC would come back and innocently claim that they were “misunderstood”. I hate to say it, because I wish that it had not happened, but I was spot on.

    What you and the TPC did in your last column was take half of the plan and called it a “tax cut” and now you are repeating that nonsense here. If you want to argue that the plan is only an “outline”, then you need to consider the entire “outline” and not just the one-half of it that you find meets your own purposes. The entire “outline” is revenue neutral. And, if you’ve got a problem with not listing all the tax expenditures that will be eliminated in the proposed process, that’s unfortunately politics. *Neither side* is listing the specific tax expenditures they will cut, but I’ve yet to read you apply similar criticism to the Murray budget. If you want to know why politics makes this impossible, perhaps Gene Steuerle can give you a clue.

    It’s not that you don’t seem to understand the net effects of the proposals. Earlier, you noted this:

    “And the bottom line: The Senate panel would have government run an annual deficit of about 2.4 percent. The House panel would bring the federal books nearly to balance over the entire period, with an average deficit of about 0.6 percent. By 2023, the Senate plan would maintain the deficit at about 2.4 percent while the House plan would create a small surplus.

    Looked at as numbers alone, the spending gap is quite large but the revenue targets are not that far apart. The gap seems especially bridgeable since both sides have embraced the idea of cutting tax preferences from the revenue code. Closing a gap of a few tenths of GDP doesn’t seem out of reach.
    Ryan said that the reduction to 25 percent is a “goal”. If tax expenditures can’t be reduced to meet that goal, then rates would not go that low. You cannot simply ignore that, as the TPC has purposely done. If you would spend less time in the gym, perhaps you would understand that simple point and communicate it fairly and objectively to your readers.”

    Now, you claim not to understand that because what is stated above is that the “revenue numbers are not that far apart”, But, despite that, Ryan’s plan is now, a day or two later, a $5.7 trillion “tax cut”.

    Howard, if you are going to distort Ryan’s budget plan, try to at least be consistent. This is not a problem with your “modelers”. It is a problem of your unfair and inaccurate description of the plan. *That* was the caricature. It is a problem with Howard Gleckman and with the leadership at the TPC who are allowing you to get away with it.

    It would be nice, for once, if Don Marron would post here and tell the readers whether this is Howard Gleckman’s personal view (see disclaimer in the upper right hand corner of this page) or whether Howard Gleckman is actually speaking here for the TPC, which he is purporting to do. You cannot have it both ways.

  2. SteveinCH  ::  4:00 pm on March 19th, 2013:

    And yet the TPC said nothing about the Senate or House Democratic budgets which use the same legerdemain (albeit at a lower level).

    I firmly agree the Ryan tax plan is pretty much unworkable if one accepts that distribution is sacrosanct. But, TPC provides no context on the progressivity of the US tax code. One could be excused for thinking the Federal tax code is not already steeply progressive and more progressive than at any time in the last 35 years (which is as far back as CBO has distributional tables). If the current level of progressivity is sacrosanct, why is the progressivity of 2000 or 1990 or 1980 not equally sacrosanct.

    TPC could play an important role here but instead it chooses to look at only one plan and not to provide useful context

  3. Vivian Darkbloom  ::  4:04 pm on March 19th, 2013:

    To correct the above quotation:

    The quotation marks in the above earlier comment by Gleckman should end with “out of reach”.

    The para beginning “Ryan said…” is not part of the quote—those words are mine.

  4. AMTbuff  ::  4:12 pm on March 19th, 2013:

    “TPC described the size and nature of the hole the House GOP has dug for itself.”

    Too bad the TPC doesn’t realize the size and nature of the hole it’s digging for itself by continually wading into partisan debates.

    This hole is full of mud. No organization can enter and remain clean.

    Once upon a time the TPC sensibly restricted itself to modest good government proposals (such as AMT reform) and analyses of the long-term fiscal gap. Today’s authors want to mix it up in the mud regardless of the damage to TPC’s reputation. As far as I can tell, only Gene Steuerle studiously balances his articles and avoids all but the most general discussion of current partisan issues. That approach makes his articles much more thoughtful and valuable.

    I wonder if the TPC’s change of direction in recent years flowed from the predilections of authors or whether it was requested from the people funding TPC. Most of the funding organizations are on the left half of the spectrum, but even they must realize that TPC’s opinion will carry less weight the further it moves from non-partisanship.

    Maybe TPC authors, like CBS’s venerable Mike Wallace, truly can’t see the slant in their presentation. That’s understandable. Such a blind spot all the more reason to avoid jumping into the partisan fray.

    Here’s my simple suggestion. Before TPC publishes anything, ask the staff “Would Gene Steuerle have chosen to write this article?” If the answer is no, feed the idea to the shredder and write something else.

  5. gwills  ::  9:15 pm on March 19th, 2013:

    Vivian, what Howard presented was the deficit resulting from the revenue lost by rate cuts. He then plainly bullets many different prescriptions for closing that hole, the first being cutting tax code expenditures which you clearly didn’t read as you vindicated the author for not representing that possibility. You then say that if they can’t cut enough expenditures they won’t cut rates as drasticly and then again vindicate the author for not suggesting that, knowing that the 2 rates (10 & 25) are the ONLY specifics related to tax reform in the entire budget. Why wouldnt he stick to those rates when constructing models? Try again

  6. Vivian Darkbloom  ::  7:16 am on March 20th, 2013:

    gwillis,

    1. This problem did not arise with Howard’s unsuccessful attempt here to rectify a serious problem. The problem is one *he* created in his earlier post of 15 March 2013. None of those “bullet points” were made in that earlier post so this damage control comes a bit late. Most importantly, Gleckman omitted, in that earlier post, the very important fact that Ryan’s plan presents a *goal* of reducing the top rate to 25 percent. He improperly referred to the Ryan plan as a significant ($5.7 trillion) “tax cut” without mentioning any of those “mitigating” factors he belatedly has come up with. The original formulation was faulty and misleading, as I indicated in my comment to the earlier post, in that it tries to isolate one part of the plan described as a “tax cut”. Try as he might, he can’t blame that on Ryan, on the “Democrats who so enthusiastically embraced our analysis”, or to Republicans who objected to that “enthusiastic embrace” for the simple reason that it was embracing something misleading and downright incorrect.

    And, the fact that his earlier post was misleading and clearly susceptible to abuse (both sides of the ideological divide seem to agree on that, but of course, per Gleckman, that’s not *his* fault) was clearly foreseeable. It was foreseeable because Gleckman has used the same misleading formula that the Romney’s earlier proposal was subjected to and made it even more misleading. If you follow these matters at all, you would know that that earlier narrative on the Romney report also had to be walked back because the TPC had been “misunderstood”. One one is constantly “misunderstood” by others, I think it’s time to look a little more closer to home as to why that might be happening and to take steps to preclude it in the future. This is something I hope Mr. Marron and others at the Urban and Brookings organizations will direct their attention to. As I indicated before, a very sensible start might be to clearly state to readers (including and especially the media) whether Gleckman is expressing his personal views here or whether he’s acting as the official spokesman for the TPC. Alas, as a practical matter, whatever is said about that, the public will likely continue to perceive these unhelpful little Gleckman mis-descriptions as the TPC’s official word on the matter. And, the TPC will likely conclude, as Gleckman has here, that “it’s not our fault”. Well, it is their fault. If the TPC wants to have a summary of its work that is going to be quoted in the media as the TPC gospel and thereby have a significant effect on presidential elections and public policy decisions, then that word should vetted and approved in advance and clearly so stated rather than sloppily presented in a blog post for which the responsibility (personal or institutional) is not clear. Someone responsible in management has to take control of corporate communications. We should expect no less from our “non-partisan”, “not-for-profit”, taxpayer-subsidized public policy think tanks who want to be major players in our national policy.

    As I noted in my comment to Gleckman’s original post:

    “Let’s look for that “huge windfall for high-income taxpayers” quote to be picked out (likely as intended by Howard) in the mainstream press. Then, the TPC, after all the headlines are out, will innocently claim they are being misunderstood. (I already see that WAPO has wasted no time here).”

    Given that earlier experience, one would think that Gleckman and the TPC would now be much more careful in how they are reporting on budget plans. Gleckman in this post (but not in the original one) now also says this was “predictable”. If it was so predictable, then Gleckman and the TPC should have been more careful in how they are delivering the findings of their physically-fit “modelers”. Again, this isn’t about their modelers, it is about Gleckman’s misrepresentation of the plan. The fact that this was so predictable is not so much a reflection on those in the mainstream partisan media who have made it worse (whom Gleckman now wants to blame), and it is even less the fault of the partisan mainstream media who, in turn, are complaining about that abuse. The problem began with the TPC and, specifically, Howard Gleckman and the leadership of the TPC who continues to give him loose rein and allow this to happen. The fact that it was so predictable leads me to believe that Gleckman and a certain coterie at the TPC *wanted* it to happen or were, at the very least, very nonchalant about the consequences.

    2. Gleckman should not have presented the rate reduction *goal* as something certain to happen (and therefore characterize that as a “tax cut”) and the reduction in tax expenditures as something not certain to happen (and therefore completely ignore that aspect) and then smugly conclude that the overall budget is therefore a “tax cut” and now that the Republicans have “dug themselves into a hole”. That misrepresents the plan, invites confusion and abusive quotation by those who oppose that plan and, as now Gleckman readily admits, was totally predictable, but he shares no part of the blame. The snide “digging a hole” and other choice phrasing in this and other Gleckman columns also belies a deep-seated prejudice on the part of Gleckman, if not the entire “non-partisan” TPC.

    3. Why wouldn’t he stick to those rates when constructing models? One can stick to those rates if a) one clearly and accurately describes that upper rate as a *goal* (as clearly and repeatedly stated in the budget but curiously omitted from Gleckman’s earlier column) and b) nets the result of that with the other part of the budget, to wit, the tax expenditure reductions, and c) explain that a) will necessarily change with b).. The fact that the budget does not specify precisely which ones will be reduced or eliminated or capped is no excuse for omitting to do that (except perhaps if you are evaluating a budget presented by Obama or Murray when they finally get around to presenting one).

    4. I would make the friendly suggestion that you consult a good dictionary as to the meaning of the word “vindication” and then come back and “try again”.

  7. TaxAttack  ::  10:43 am on March 20th, 2013:

    Couldn’t agree more

  8. Michael Bindner  ::  8:58 pm on March 20th, 2013:

    The other possibilities are supporting a carbon tax (which was there idea in the first place) or to cut spending – particularly in intergovernmental transfer programs to the states – especially Medicaid. This is, of course, the wrong thing to do. It would be better to divide Medicaid into two parts. One part is for people who are poor – who would be in job training or workforce development programs – who should simply be treated as employees of those programs (whether public or private) with the federal government picking up the tab. Senior Medicaid should be administered federally as part of Medicare, solving the demographic problem facing most states. If we fund it with consumption rather than payroll or income taxes, with a VAT-like Net Business Receipts Tax (a VAT with deductions), then retiree healthcare could even be an offset to taxes due.

  9. Bruce Thompson  ::  12:27 am on March 23rd, 2013:

    On the contrary, I think TPC is doing a real service by analyzing the proposal. I would note that you do not offer any corrections. Clearly, because of the vagueness of the Ryan proposal TPC had to make a number of assumptions, but they appear to me to be quite reasonable. If you disagree, please suggest other assumptions so we can see what the effect on the results is.

  10. Bruce Thompson  ::  12:37 am on March 23rd, 2013:

    Vivian,
    Did you even read, the original analysis? It fits neatly on one page and clearly spells out the assumptions used. I would encourage you to be specific about what assumptions you disagree with.

    I tried to figure out the assumptions used in the original Ryan budget but could not find them. They are actually listed in one of the CBO reports and are the order of assuming percentage growth or decline of various budget costs and revenues. It seemed more a spreadsheet exercise than a serious budget, leaving most questions unanswered.

  11. ????? ?????  ::  11:08 pm on September 1st, 2014:

    日本は繊維製品展さ――中国紡績企は三回にわたってCFF展示会に参加して、良い効果を、その行為を日本市場を開拓の主要なルート。――南&#368

  12. toms canvas wedges  ::  11:20 pm on October 12th, 2014:

    two. Word of mouth. I by no means flown Kalula, but right here I’m creating about it. At our most recent comply with up using the orthopedic, I used to be still concerned about his foot handing over. So was the doctor. He recommended we consider some reverse very last footwear (fundamentally they can be curved Dennis Brown footwear which are wore within the wrong feet). New (to Newbury Road) denim shop The Blues Jean Bar is offering twenty p.c off storewide today plus a cost-free glass of Skinny

  13. Ralph Lauren Short Jeans  ::  2:29 am on November 3rd, 2014:

    Come for every tutti i possessori di carta di credito staccabili, alcuni portafogli vengono con fermasoldi costruiti dentro una clip entrate potrebbero allenare negozio online essere un piccolo grande accessorio appariscente. Un argento lucido o oro one sembra incredibilmente moderna, e quelli con più ornamenti elaborati, ad esempio,dress ralph lauren, pelle di razza o incisione, imballare uno stile ancora più grande…, Calcare, scorie, marmo, quarzo, granito, cemento, clinker e cos&#

  14. woolrich gilet vendita  ::  4:46 am on March 21st, 2015:

    DODOcase your iPad$2.3m Serra bought from all recent York’Art Deco within Alps II': An accumulation pioneering few-Model posters’HISTORIC FERRARI: Tales concerning right track in addition to the record 1949-1974”Inside the exact Paddock: Elevated Transporters over by visiting Work”James Dean-Fifty lengthy Ago”Mythos Ferrari': An impressive pictureprofessional exhibition’Omas regarding Maserati”Very Zino’-The actual brand new Luxury identity caused outside of Davidoff’Wellness’ at your home s