Yes, Paul Ryan Does Cut Taxes For The Rich
A number of conservatives have asserted that, contrary to what I’ve written, the House Republican budget written by Paul Ryan does not cut taxes for high earners. (See John McCormack, Ramesh Ponnuru, Charles Krauthammer, and McCormack again quoting Ryan.) Here’s the argument. Ryan keeps overall tax levels the same as they are right now by making the tax cuts permanent. He would then reduce the corporate tax rate and the top income tax rate by ten percentage points, from 35% to 25%. But he would make up for that additional revenue loss by closing “loopholes and deductions,” many of which benefit the rich. Therefore, his plan doesn’t really cut taxes on the rich.
There are four problems with this claim, each of them fatal.
First, the argument simply reflects a legitimate difference in baselines. Under current law, the Bush tax cuts are in full effect, but expire at the end of 2012. Keep Bush-era tax levels in place is not a tax cut compared with the tax code now, but it is a tax cut compared with the tax code in 2013. Which is the true baseline? I think both sides have a point, and Congressional scorekeepers have taken to using both baselines.
When President Obama accuses Ryan of cutting taxes for the rich, he’s using the post-2012 baseline. I consider that the best point of reference because the most important force in our political system is inertia. Given our multiple veto points, it takes great effort to enact a policy change that the parties disagree upon. Ryan proposes to make that change. Therefore, I think it’s fair to describe him as “cutting taxes,” even if revenues did remain at present levels (which I dispute, but more on that later.) I do think there’s merit in both baselines. The argument that Obama is lying about Ryan — that calling him a tax-cutter is, in Krauthammer’s characteristically understated phrasing, “scurrilous” — rests upon the assumption that the current-policy baseline is not only more preferable but the only remotely honest point of reference. That seems like a huge stretch.
Second, even if we accept Ryan’s preferred baseline, his description of his plan is hard to accept at face value. Tax reform is a trade where you take away deductions (that’s hard) and use the money to reduce rates (that’s easy.) The rate reductions are specified. The reduced deductions aren’t. Another way to put this is that Ryan has proposed a specific tax cut that would benefit the affluent, accompanied by utterly vague promises to find offsets. At the very least, the rate-lowering portion ought to carry more weight than the deduction-closing portion.
Third, even if we accept both Ryan’s baseline and assume he will match every dollar in lost revenue from the rate cuts with another dollar in reduced deductions, he will almost certainly wind up cutting taxes for the rich relative even to the post-Bush tax code. Ryan implies that his plan would leave the rich paying the same effective tax rates as they do now because he’s “getting rid of loopholes and deductions, which by the way are enjoyed by the top [tax] rate filers, the people in the top two brackets.” But he hasn’t put out any details. In 1995, House Republicans loudly promised to promote shared sacrifice by rooting out corporate welfare in the tax code. The actual savings they produced turned out to consist of proposals that hurt the poor (by cutting the Earned Income Tax Credit), benefited business (by letting them swipe funds from employee pensions, keeping the money as profit and thus increasing corporate tax revenue), or other reverse-Robin Hood measures.
Now, Ryan was not around then. But we can get a measure of his intentions from the more specific tax plan laid out in his “Roadmap” from 2010. That plan constituted a massive tax cut for the rich, combined with a tax hike on the middle class.
The Tax Policy Center examined various proposals to reduce tax deductions while using the revenue to lower rates across the board. All the plans decreased the tax burden for the top-earning 1%. The problem is that tax deductions are just not worth as much to very rich people as low tax rates.
It’s true that the Bowles-Simpson deficit reduction plan includes proposals that would lower rates to around 25% while increasing the effective tax rate paid by the very rich. To do that, you have to do things like raise the estate tax rate and completely eliminate the preferential treatment of capital gains. But Ryan’s budget promises instead — and this is the only specific policy commitment in its tax section, other than lowering rates — to expand the preferential treatment of income from wealth:
Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock – the pool of saved money available for investment and job creation – has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation. That means more jobs, more productivity, and higher wages for all American workers.
Fourth — almost there! — even if you reject everything I’ve written to this point, Ryan’s plan includes the repeal of all the taxes in the Affordable Care Act, including the taxes on the affluent. Here’s the Path to Prosperity’s description of health care taxes he proposes to undo:
The new law imposes a 0.9 percent surtax on wages and a 3.8 percent surtax on interest, dividends, and capital gains. Both taxes only apply to filers in the top two income brackets, but as discussed elsewhere in this section, those filers include small businesses employing millions of Americans, and the new taxes on capital will reduce the pool of capital available for investment and job creation.
There. Per Paul Ryan, these are upper-bracket taxes he proposes to lower. He could keep those taxes in effect, and cover a few of the uninsured people he throws off their coverage, or make the progressively-more-inadequate health care vouchers he uses to replace Medicare slightly less inadequate. But he chooses not to do that, because he believes it’s more important to tax capital at lower rates. It’s fine for him to believe that. But he and his defenders have to stop insisting that he doesn’t propose tax cuts for the rich. He indisputably does so.
By: Jonathan Chait, The New Republic, April 20, 2011
GOP: Playing “Dangerous Games” With The Debt Limit
The debt limit is supposed to make Congress think twice before passing tax cuts or spending increases that add to the national debt. Instead, lawmakers routinely support policies without paying for them — like the Bush-era tax cuts and two wars — and then posture and protest when their decisions require raising the debt limit.
So it will be once Congress returns from its spring recess. The debt limit — $14.3 trillion — will be hit as early as mid-May. If it is not raised in time, the government will have to use increasingly unorthodox tactics to meet its obligations, which would disrupt the financial markets and the economic recovery.
Default is theoretically possible, though public outrage over the mess would likely compel Congress to raise the debt limit before then. The best approach, the most sensible and mature, would be to pass a clean and timely increase.
However, nothing sensible or mature is on the horizon. Republicans have vowed to extract more heedless spending cuts in exchange for their votes to raise the debt limit. To that end, they seem likely to demand changes to the budget process, like a balanced budget amendment to the Constitution, or spending caps.
Such reforms have a glib appeal — who can oppose something as prudent-sounding as balanced budgets? In fact, they are a dodge, because they cut spending broadly without lawmakers having to defend specific cuts. They are also often wired to block tax increases, without which deficit reduction efforts are not only unfair, but also will not succeed.
Take, for example, the balanced budget amendment to the Constitution that Senate Republicans recently endorsed. By rigidly requiring a balanced budget each year, it would deepen recessions by forcing tax increases or spending cuts in a weak economy.
Worse, the amendment would hold annual spending to 18 percent of the previous year’s gross domestic product, a formula that works out to about 16.7 percent in the proposal’s early years, according to the Center on Budget and Policy Priorities. That is a level last seen in 1956 — a time before Medicare, before the interstate highways, when many baby boomers were not yet born, never mind aging into retirement.
Sharply lower spending would, in turn, allow for big tax cuts. Those tax cuts would be virtually irreversible, since the amendment calls for a two-thirds vote of both houses to raise taxes.
Another bad idea is the spending cap proposed by two senators, Bob Corker, Republican of Tennessee, and Claire McCaskill, Democrat of Missouri. It would cap spending at around 21 percent of G.D.P., compared with about 24 percent now — which would require deep cuts like those in the House Republican budget plan. With its emphasis on spending cuts, the cap also seems intended to reduce the deficit without tax increases.
In the successful deficit reduction efforts of 1990 and 1993, budget process reforms were helpful. The key, however, was to first enact credible deficit-reduction packages — with spending cuts and tax increases — and then impose rules, like pay-as-you-go, to prevent backsliding. Process reforms alone avoid the hard work. Still, they can exert powerful political pull.
The White House and Congressional Democrats must not allow themselves to be taken hostage again.
By: The New York Times, Editorial, April 22, 2011
Is Grover Norquist’s “Sharia Tax Law” Causing The GOP To Rethink It’s “Pledge”?
Senator Tom Coburn, a conservative Republican from Oklahoma, has had the good sense to demand an end to the $5 billion annual tax credit to makers of corn ethanol, a wasteful subsidy to farm states that is also dubious environmental policy. For his outspokenness, Senator Coburn was pilloried by anti-government activists of his own party who cannot stand the idea of more revenues flowing into the federal Treasury. But he and a few others in the Senate are holding fast, suggesting that at least some Republicans are willing to break with party orthodoxy to reduce the long-term budget deficit.
The loudest criticism came from Grover Norquist, whose group, Americans for Tax Reform, is the author of the Taxpayer Protection Pledge that has become a sacred covenant for virtually anyone wishing to run as a Republican. More than 95 percent of the Republicans in Congress have signed it (including Senator Coburn), as have many Republican governors and state lawmakers.
The pledge is often thought of as an agreement never to vote for raising taxes for any reason, but it goes even further than that. Those who sign it also vow never to eliminate any tax deductions or credits (like the handout to ethanol makers), unless the resulting increase in revenues is offset, dollar for dollar, by further tax cuts.
The pledge is really less about keeping taxes low than it is about holding down government revenues, which prevent the growth of government services. Mr. Norquist has famously said his goal is to shrink government “down to the size where we can drown it in the bathtub.”
Mr. Norquist can afford to be candid about his fierce aversion to government services, since he does not have to run for office with the votes of people who like those services. The Republican lawmakers who have joined his congregation, however, are less forthright about the effect of their policies. They go around lulling constituents with phony mantras like “Washington doesn’t have a revenue problem; it has a spending problem,” as if cutting spending is the only conceivable solution to lowering the deficit.
This purity finally ran into a tough-minded pragmatist in Senator Coburn. Though his zeal to eliminate many worthy government programs is still excessive, he is right to see the wastefulness in the ethanol giveaway — and the extremism of Mr. Norquist’s position. Senator Coburn’s spokesman has even described Mr. Norquist as “the chief cleric of Sharia tax law.”
Senator Coburn is also a member of the “gang of six” senators that has been trying to find a bipartisan way to reduce the nation’s debt. He and the two other Republicans in the group, Saxby Chambliss of Georgia and Michael Crapo of Idaho, say they are opposed to raising tax rates but hope to rewrite the tax code in a way that brings in more revenue by eliminating many unnecessary tax breaks and broadening the tax base.
That, at least, represents the beginning of a useful conversation. It could very well mean that the rich would pay more in taxes. Which is why Mr. Norquist, in full grand-inquisitor style, has demanded that Senator Coburn drop out of the gang.
His influence, happily, seems to be on the wane. The three senators have reminded Mr. Norquist that their highest oath is not to him or some abstract pledge, but to support and defend the Constitution of the United States.
By: The New York Times, Editorial, April 21, 2011
Remember The Health-Care Reform Debate?: How The Landscape Has Changed
As a participant in the great health-care wars of 2010, it’s been — I don’t know: Amusing? Depressing? Annoying? Vindicating? — to watch Rep. Paul Ryan’s budget run over every principle or concern that Republicans considered so life-or-death a mere 400 days ago. A partial list:
Big changes need to be bipartisan changes. “The only bipartisanship we’ve seen on [the health-care] bill is in opposition to it,” said Eric Cantor, now the House majority leader. “When the stakes are this high – reforming 20 percent of the U.S. economy – there must be constructive conversations and negotiations from Republicans and Democrats in both houses of Congress,” wroteformer representative Tom Davis. The Ryan budget, which is unquestionably a more ambitious document than the Affordable Care Act, passed the House with no Democratic votes and four Republicans voting no. The only thing bipartisan was the opposition, etc. This appears to have given no Republicans anywhere any pause.
Polls matter. In March 2010, John Boehner was very, very upset that Democrats were working to pass a health-care law that a slight plurality opposed in polls. “President Obama made clear he is willing to say and do anything to defy the will of the people and force his job-killing health care plan through Congress,” he thundered. Last week, Speaker Boehner and the Republicans passed Ryan’s budget. How do its elements poll? Much, much worsethan the Affordable Care Act.
The Affordable Care Act’s Medicare cuts will devastate hospitals! Last fall, Ryan’s health-policy guru was saying,“The official Medicare actuaries have determined that approximately 15 percent of hospitals will be driven out of business in less than ten years if these cuts go through and called the cuts ‘clearly unworkable and almost certain to be overridden by Congress.’” Now those same cuts are in Ryan’s budget. C’est la vie, I guess (that’s French for “only Democratic cuts hurt hospitals”).
The Affordable Care Act’s savings don’t begin quickly enough! When the tax on expensive employer-provided insurance plans was pushed back to 2018, conservatives were outraged. “The odds are high that the excise tax will never actually happen,” wrote David Brooks. “There is no reason to think that the Congress of 2018 will be any braver than the Congress of today.” It was a fair argument: Cost savings that begin in the future are less certain than cost savings that begin now. So when does, say, Ryan’s voucherization of Medicare begin? Not 2012. And no, it’s not 2018. It’s 2022.
There’s no reform in the Affordable Care Act. “It would take Sherlock Holmes armed with the latest GPS technology and a pack of bloodhounds to find ‘reform’ in the $2.5 trillion version of the health-care bill we are supposed to vote on in the next few days,” then-Sen. Judd Gregg wrote. But apparently Holmes got his iPhone out, because now the Affordable Care Act is chock-full of reforms. In fact, it’s the model Republicans are following. “It’s exactly like Obamacare,” Sen. John Cornyn saidof the Ryan plan. “It is. It’s exactly like it.” And he meant that as a compliment!
The Congressional Budget Office will score anything you tell it to. “Garbage in, garbage out,” Sen. John McCain said. “Can you really rely on the numbers that the Congressional Budget Office comes out with?” asked Fox’s Steve Doocy. Now, of course, Republicans are touting CBO’s estimates of Ryan’s savings.
First, “do no harm.” That was former Republican National Committee Chairman Michael Steele’s big applause line. “Republicans want reform that should, first, do no harm, especially to our seniors,” he wrote in The Washington Post. Cantor said the Affordable Care Act would “cut Medicare for our seniors and increase premiums for many Virginians.” Say what you will about Ryan’s budget, but going from paying 25-30 percent of your Medicare costs to 70 percent cuts your Medicare while increasing your premiums. Steele also said that “we need to protect Medicare and not cut it in the name of ‘health-insurance reform.’ ” Instead, it’s getting cut in the name of tax cuts. To be fair, Ramesh Ponnuru saw this one coming, so I can’t say conservatives were denying it at the time.
I’m sure I’ve forgotten a couple, but that’s what the comment section is for. The natural next question is whether Democrats have been similarly hypocritical in their opposition to Ryan’s plan. So far as I can tell, we’ve not seen it: Democrats think the plan puts too much of a burden on the backs of seniors and the poor — two things they worried about constantly during the Affordable Care Act — and cuts too many taxes for the rich. They also note that the Congressional Budget Office says privatizing Medicare will make it more expensive — the same finding that led to liberal advocacy for a public option. But if I’m missing something here, I imagine it, too, will come up in comments.
By: Ezra Klein, The Washington Post, April 21, 2011
In Politics Of Temper Tantrums, Washington Post As Spineless As GOP In Debt Ceiling Debate
Yesterday, The Washington Post editorial page turned into Springfield, circa 1991. Not Springfield, Illinois or Springfield, Massachusetts. That more famous Springfield. The one that’s home to the Simpsons.
You see, 20 years ago Lisa Simpson wished for a world in which every nation laid down its arms and there was peace. And it was done. But then two crafty aliens landed in Springfield and took over the earth, armed only with a slingshot and a club.
What does that have to do with The Washington Post? Well, we’re just days into the debate about raising the debt ceiling and they’ve already given up.
Here’s what I mean:
Every politician knows that voting to raise the debt ceiling, particularly in an electoral environment like this one, is dangerous. Large swaths of the electorate are opposed. And the most angry and energized conservatives have made it an article of faith to punish legislators who facilitate more government spending. Voting to raise the debt ceiling is a tough vote–politically.
But on the merits, it’s got to be one of the easiest votes ever. Everyone from the U.S. Chamber of Commerce to former U.S. Labor Secretary Robert Reich agrees that we must raise the debt ceiling. That’s true of just about every economist of every political stripe, too. They say that if we don’t it will lead America, and perhaps the global economy, to literal economic ruin. The stakes couldn’t be higher.
Democrats are on board. They’re pushing for a “clean” vote on the debt ceiling—an up or down vote on that issue alone. In essence they’re saying: let’s do what needs to be done and get it over with. Then we can move on to the myriad other pressing matters confronting the nation.
Republicans are in a different place. They’re making increasingly belligerent demands to tie various kinds of “reforms” to the debt ceiling vote. Deep spending cuts. A balanced budget amendment. Caps on future spending. All sorts of things that may or may not have merit, but which are also deeply partisan and political. And they say they won’t vote to raise the debt ceiling unless their demands are met—if they vote for it at all.
Their position in a nutshell: I’m a Republican and I’m not going to prevent economic ruin unless I get these other things that I really, really, really want. It’s the politics of temper tantrum. Only this time the baby’s got his finger on the nuclear launch codes.
Cue the media. There’s a reason “freedom of the press” is enshrined in the First Amendment. It’s because the Founding Fathers envisioned a Fourth Estate that held government accountable at times just like these.
Instead, we get this: buried in the sixth paragraph of yesterday’s editorial about Standard and Poor’s, the Post dismisses the idea of a “clean vote” saying it’s “unrealistic as a political matter” because “you couldn’t get enough Republican votes in the House to increase the debt limit without some spending cuts attached.”
Well, I guess that’s that. The Republicans have rattled their slingshot and the Post editorial page has fled for the hills.
What’s even more galling is that you needed look no further than the front page of yesterday’s Post to see just how political the issue has become for Republicans. There, Philip Rucker told the sad story of Arizona freshman Republican Rep. David Schweikert. Schweikert concedes that failing to raise the debt ceiling will cause economic chaos, but then he surveys the angry faces of his Tea Party constituents in town hall after town hall and wrings his hands. Destroying the economy on one hand and lessening my chances for reelection on the other…oh what is a Republican to do!
Here’s an idea: suck it up and do the right thing. Vote for the bill and, if you lose your re-election, well, at least you have the comfort of knowing that you didn’t help ruin the world’s economy. Isn’t that what we say we want from our leaders? To take tough votes and put aside personal, ideological, or political goals when the nation’s interest calls for it?
Of course, as much as I would like to think otherwise, my saying so probably won’t encourage Republicans to do much of anything. If only there were an influential, well-respected, credible voice with a broad reach whose job it was to offer opinions like that… Sigh.
Perhaps not all is lost. In the aforementioned Simpsons episode the aliens are eventually vanquished when Moe the bartender hammers a nail through a board and chases them with it. There are a couple months to go in this debate. There’s still time for the Post to find its spine. Someone get them a nail and a board.
By: Anson Kaye, U.S. News and World Report, April 21, 2011
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 