by Bruce Webb
The Ryan Budget Roadmap was introduced in January, and then sank like a stone. But with Ryan’s appointment to the Catfood Commission it and its author have drawn some new attention which borders on fawning. Or at least part of the plan has drawn attention, that part which would privatize Social Security and voucherize Medicare. What is getting less attention is his radical tax plan which if fully implemented would mean inheritors of great wealth would never pay federal taxes. EVER.
To set the background we have this article from the WaPo Monday Rep. Ryan pushes budget reform, and his party winces And it turn frames it as follows:
Instead, Ryan is running a campaign of a different sort, one his party has so far refused to adopt: He is determined to persuade colleagues to get serious about eliminating the national debt, even if it means openly broaching overhauls of Medicare and Social Security.
He speaks in apocalyptic terms, saying the debt is “completely unsustainable” and warning that “it will crash our economy.” He urges fellow politicians, and voters, to stop pretending that this problem will go away on its own.
He administers his sermons with evangelical zeal. He will go anywhere and talk to anyone who will listen. When he is not writing op-eds and appearing on television, he can often be found speaking to liberal and conservative audiences alike about his “Roadmap for America’s Future,” a plan he says would fix the problem.
So what is step one and two in cutting “completely unsustainable” debt? Well slashing Social Security and Medicare. And step three? ELIMINATE ALL TAXATION FOR BILLIONAIRES AND THEIR HEIRS. Details directly from Ryan’s website under the fold.
The main page for the Roadmap is here: http://www.roadmap.republicans.budget.house.gov/ If we go to the tax reform page we get the following (bolding mine):
This plan discards a needlessly complex and manipulative tax code, replacing it with a simplified mechanism that promotes work, saving, and investment.
Provides individual income tax payers a choice of how to pay their taxes – through existing law, or through a highly simplified code that fits on a postcard with just two rates and virtually no special tax deductions, credits, or exclusions (except the health care tax credit).
Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts. Also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four).
Eliminates the alternative minimum tax [AMT].
Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax.
Replaces the corporate income tax – currently the second highest in the industrialized world – with a border-adjustable business consumption tax of 8.5 percent. This new rate is roughly half that of the rest of the industrialized world.
First thing to note is that this plan for ‘simplification’ sets up two parallel tax systems, allowing people to stay on the existing one if they like. Considering that just about everyone would get a tax cut under the new system why even have this provision in? Because Ryan can only make his revenue projections by assuming that most people will willingly stay on the old system and pay more taxes. But that headshaker pales in comparison to the implications of the text I bolded.
These provisions are billed as encouraging ‘savings’, but on inspection ‘savings’ here goes far beyond a worker’s 401k, it includes ALL investment by anyone including billionaires like Peter G Peterson and Warren Buffett. Because while you can get to be a millionaire by being paid direct compensation by your employer and even a multi-millionaire you don’t become a billionaire that way, instead billionaires get their money from a combination of dividends, asset sales (capital gains), regular interest, and in some cases ‘carried interest’. Under the Ryan Roadmap all of that would be 100% tax free as would passing it on to your heirs. In turn that would mean that all inheritors and their heirs in turn could if they choose live their whole lives without paying a penny in federal taxes, as distributions from their trust funds would all come in the form of dividends, asset sales, and interest. And of course they would get full enjoyment of all real and personal property accumulated: mansions, art collections, yachts, jewelry, after a couple of generations even the Queen of England might get jealous of all your swag.
This isn’t a deficit reduction plan, this is a Randian wet dream that would reward the ‘Producers’ (here defined as the Trustafarian class living off of grandpa’s wealth) at the total expense of the ‘Parasites’ (that is though people actually contributing to future productivity via labor). This is what passes for ‘serious’, for ‘intellectual’, for ‘courageous’ in the Republican Party today. BOLD ENOUGH TO GIVE 100% TAX BREAKS TO BILLIONAIRES.
Note that there is no hint of this in the WaPo article. Now I might have just let this WaPo article pass as being, after all old news, except this Ryan worship seems to be coming a trend. Because CNN followed up with this puff piece this morning A Young Republican With a Sweeping Agenda
In this highly charged election season with both houses of Congress at stake, not a lot of politicians are lining up publicly behind Mr. Ryan. He is, nonetheless, suddenly a rising star in some corners. And like many other politicians whose ideas were once considered extreme, only to later be mainstream — like Ronald Reagan — Mr. Ryan is seen as on the leading edge of something.
Why? His “Roadmap for America’s Future,” an elaborate (critics say drastic) plan that aims to erase the federal debt by 2063, simplify the tax code and significantly alter (his critics say eviscerate) Medicare and Social Security. When asked to handicap the 2012 Republican presidential field, Sarah Palin called Mr. Ryan “sharp.” Newt Gingrich dubbed him “extraordinarily formidable.” And, in a column, George Will imagined him as vice president to a President Mitch Daniels (now the Republican governor of Indiana).
Mr. Ryan, 40 and the ranking Republican on the House budget committee, has been in Congress 12 years, but it may have been President Obama who gave him and his Roadmap the broadest attention yet. This year, Mr. Obama alluded to the plan as a “serious proposal,” though the White House promptly made it clear that it had problems with its details.
Just kill me now. This plan that proposes to cut almost all taxation on capital, and all taxation on individual holders of capital, is billed as ‘simplification’, as something that in time might be seen as ‘mainstream’, that even Obama is willing to dub a ‘serious proposal’ although he might have some ‘problems with its details’. Ya think? Anyone want to calculate the cost of THIS proposal over the Infinite Future Horizon?
No one who had read through this plan and thought through the implications could take it seriously.
Many people in the major media and in the Beltway take it seriously.
Well it doesn’t take a lot of logical chops to complete this syllogism and draw the right conclusion. These people are fundamentally not serious, in large part because they know that the American people as a whole are not likely to hold them accountable for not doing their homework. Or maybe one of our crack commenters can explain how you describe a plan to slash trillions in tax on capital still can be scored as solving the long-term budget crisis. You can start with the CBO score of the Roadmap. CBO: Letter to Congressman Ryan. Why didn’t CBO notice and score the huge hold the Roadmap would blow in future revenue. Simple, they were instructed to ignore it (bolding mine) .
Other Tax Provisions. The proposal would make significant changes to the tax system. However, as specified by your staff, for this analysis total federal tax revenues are assumed to equal those under CBO’s alternative fiscal scenario (which is one interpretation of what it would mean to continue current fiscal policy) until they reach 19 percent of gross domestic product (GDP) in 2030, and to remain at that share of GDP thereafter.
Although in truth it is not all just supply-side fairy dust, because the plan does raise some significant revenue. By putting new taxes on labor.
The Roadmap would also eliminate the income and payroll tax exclusions for employment-based health insurance. As a result, more earnings would become taxable for Social Security purposes, thus boosting future benefit payments, and payroll tax revenues credited to the Social Security trust funds would increase.
Yep, even if you don’t earn enough to actually be exposed to income tax, you get to pay a payroll sur-tax from the first dollar on the value of your employer supplied health insurance (if any). The implications of this would require a post of their own.
Ryan Roadmap: Cut taxes on the rich, increase taxes on the poor. Now that is tax simplification we can all believe in! (Not).