The fiscal plan outlined by House
Budget Chairman Paul Ryan calls for reducing the top individual
and corporate tax rates from 35 percent to 25 percent, which
would require lawmakers to consider eliminating tax breaks such
as the mortgage interest deduction to meet his revenue targets.
Over the next decade, the Wisconsin Republican wants the
government to collect $4.2 trillion less than it would if
Congress did nothing, and $1.8 trillion less than under the
budget proposed Feb. 14 by President Barack Obama. Ryan’s
targets in the plan he released yesterday are similar to the
amount of revenue that would be raised if Congress extends tax
cuts set to expire at the end of 2012.
Lowering rates that much while reaching the revenue targets
in Ryan’s budget would require lawmakers to consider eliminating
so-called tax expenditures, including the mortgage interest
break and the deduction for charitable contributions, said Mel Schwarz, partner at the Washington national tax office of Grant
Thornton LLP. Both have long been viewed as politically
difficult to challenge.
“It would require very, very significant changes if he’s
going to make this a revenue-neutral proposal,” Schwarz said.
In a document outlining his budget, Ryan acknowledged that
such tax expenditures must be curtailed.
‘Greater Incentives’
“When offset by lower rates, it would have a doubly
positive impact on the economy,” he wrote. “It would stop
diverting economic resources to less productive uses, while
making possible the lower tax rates that provide greater
incentives for economic growth.”
Schwarz said Ryan’s plan provides an outline of a tax
proposal and that important details would need to be determined
by the Ways and Means Committee, of which Ryan is a member.
Policy makers should note that Ryan’s proposal is an
outline, not a specific plan that can be analyzed by
congressional scorekeepers, said Michael Linden, director of tax
and budget policy at the Center for American Progress in
Washington, an advocacy group often aligned with Democrats.
“This is what Congressman Ryan says his plan will raise,
regardless of whether or not it actually will,” he said.
Senator Kent Conrad, a North Dakota Democrat and chairman
of the Senate Budget Committee, criticized the proposed rate cut
as a giveaway to the country’s richest individuals, who would be
the biggest beneficiaries of the 25 percent top bracket.
‘Partisan’
“Representative Ryan’s proposal is partisan and
ideological,” Conrad said in a statement yesterday. “He
provides dramatic tax cuts for the wealthiest, financed by
draconian reductions in Medicare and Medicaid. His proposals
are unreasonable and unsustainable.”
Ryan aims to keep government revenue between 18 percent and
19 percent of gross domestic product. That’s lower than the 20
percent that President Barack Obama’s budget calls for by the
end of the decade. It’s higher than the level included in the
balanced budget constitutional amendment that Senate Republicans
released last week, which would effectively cap revenue below 17
percent of GDP.
The budget proposal also presumes the repeal of the health-
care law that Obama signed last year. That would eliminate tax
increases on capital gains, interest, dividends and wages in the
bill that applied only to individuals earning more than $200,000
annually and married couples making more than $250,000.
To contact the reporter on this story:
Richard Rubin in Washington at
rrubin12@bloomberg.net
To contact the editor responsible for this story:
Mark Silva at
msilva34@bloomberg.net