Monday, May 2, 2011

Republican and Paul Ryan Tax Priorities Would Cost Nearly $3 Trillion Over Next Decade

Republican and Paul Ryan Tax Priorities Would Cost Nearly $3 Trillion Over Next Decade

The tax proposals in the budget that the House approved on April 15 place a top priority on cutting taxes for high-income people, while doing nothing to reduce budget deficits, themselves. [1] In addition to making the Bush tax cuts permanent and continuing to provide relief from the Alternative Minimum Tax (AMT) at a cost of nearly $4 trillion over ten years, the House budget advances a series of additional tax cuts that would primarily benefit high-income households at a cost of nearly $3 trillion over that period, most of which is assumed to be offset by reductions in tax expenditures that are left unspecified. [2]

The House budget would permanently lock in all of the Bush tax cuts, which flow disproportionately to high-income people. It also would make permanent the relief from the AMT that now is regularly extended every year or two. The Congressional Budget Office estimates that extending these tax cuts would cost $3.8 trillion over the coming decade, the vast majority of which would be attributable to the Bush tax cuts. [3] The House budget essentially would finance these tax cuts with extremely large budget cuts, including cuts in a number of key programs for people with low or moderate incomes. [4]

The House budget also calls for tax reform. But its few specific proposals in this area — reducing the top individual and corporate rates to 25 percent and eliminating the AMT altogether [5] — along with its proposal to rescind the health reform law’s Medicare payroll tax increase on high-income people — follow a familiar pattern and have two common characteristics: they are very costly and would disproportionately or exclusively benefit people with high incomes.

The Urban Institute-Brookings Institution Tax Policy Center (TPC) estimates that the Ryan budget’s specific tax proposals (other than the proposal to make the Bush-era tax cuts and AMT relief permanent) would cost $2.9 trillion over the next ten years (see Table 1). This cost would be on top of the $3.8 trillion cost of making the Bush tax cuts permanent. Roberton Williams of TPC has noted that, “[v]irtually all of the tax savings from [these additional proposals] would go to households making upwards of $200,000 — the 5 percent of tax units who currently face marginal rates over 25 percent.”[6]

The House budget plan assumes that $2.5 trillion of this $2.9 trillion in additional tax cuts (presumably the tax cuts other than the measure to repeal the increases in the Medicare payroll tax for high-income households) would be paid for by broadening the tax base through changes in tax expenditures. But the base-broadening measures are left entirely unspecified.

In addition, as TPC’s Williams has explained, even if the House were to follow through on the commitment to offset $2.5 trillion of these costs, the net result would be “very likely to make the tax code much more regressive than it is today.” [7] Measures to lower the top rates to 25 percent, abolish the AMT, and repeal the health reform law’s payroll tax increase on people with incomes over $250,000 are tilted heavily toward the most affluent households. It is difficult to imagine a politically plausible series of tax expenditure reforms that would not only raise enough money to offset most of these new costs but also would raise so much of that money from high-income households that the overall result wouldn’t be regressive.[8] For example, eliminating one of the largest tax expenditures, the exclusion of employer-provided health care from taxable income, would reduce after-tax incomes by about 2 percent, on average, for households in the middle fifth of the income distribution but by one-quarter of 1 percent for households in the top 1 percent of the income distribution. The combination of reducing the top rate to 25 percent and shrinking tax expenditures would likely benefit people at the top of the income scale at other Americans’ expense.
We had the Reagan Recession and America learned nothing from those disastrous economic policies. Then we had the mini-recession of Bush first term - where he squandered a budget surplus and than we had the Great Recession and Republicans have been using that one to pull another con job on the American people. They claim - the same people who have lied us into three recessions - that we have a spending problem. Will Americans be naive enough to believe the latest big lie. Or will it dawn on the public that Republicans cannot be trusted with America's economy. They seem to think its toy they can crash and burn over and over. Until America wakes up and says enough is enough they will keep doing it. CBO report traces deficit back to 2001