New GOP budget proposal contains only two tax brackets

brideymcbriderson · March 2012

I find this interesting since most people I know favor more tax brackets because they don't like the "Obama rich" ($250k HHI) being lumped in with the $1MM HHI. I need to read more about this, but I'm definitely skeptical of it.

I'm still unclear on how putting the olds on private insurance will work since the olds use the most healthcare.

NPR: Rep. Ryan Says New GOP Budget Plan 'Offers Real Solutions Again'

With a video, an op-ed in The Wall Street Journal and press events today, House Budget Committee Chairman Paul Ryan, R-Wis., is offering what he and other Republicans say is a budget plan with "real solutions" to the exploding federal deficits and debt.
And he says that like the plan House Republicans introduced last year, which did not survive critics' challenges:

"Our budget delivers real spending discipline. It does this not through indiscriminate cuts that endanger our military, but by ending the epidemic of crony politics and government overreach that has weakened confidence in the nation's institutions and its economy."

NPR's Tamara Keith reports on Morning Edition that among the differences from last year's GOP blueprint, the new proposal would allow senior citizens in the future who are covered by Medicare to "choose between government coverage and private insurance." Last year, Ryan and his colleagues proposed turning Medicare into a voucher program.

The National Journal adds that "in an attempt to rein in government spending and slash corporate tax rates, Ryan's budget aims to lower the corporate tax rate to 25 percent, from its current level of 35 percent. It also consolidates the six current tax brackets to just two: 10 percent and 25 percent, among other cuts and changes to the tax system. ... [It] aims to cut $5.3 trillion over the next 10 years ? a drastic move that will see fervent pushback from his Democratic colleagues."

Along with the video and op-ed, the Budget Committee is posting materials about the Ryan plan on its website.

The Washington Post's The Fix blog reports that the plan is already coming under criticism from some other Republicans, who say it will be a political problem for the party.

And critics from the Left are weighing in too. Roger Hickey of the Campaign for America's Future calls it a "suicide pact ... that ignores the clear views of the majority of Americans."

CNN Money: House GOP Budget Chief Aims at Tax Code

In a year when political stalemate is expected to block any real progress on fiscal reforms, House Republicans will take a swing at tax reform in their fiscal year 2013 budget proposal due out on Tuesday morning.
House Budget Chairman Paul Ryan, the lead writer on the budget, and his caucus will call for a reduction in individual tax rates and brackets. Instead of today's six brackets, with rates from 10% to 35%, they are calling for just two -- 10% and 25%. It's not clear how much income would fall under each bracket.

The Republican proposal would also eliminate the Alternative Minimum Tax altogether.

Although originally intended to ensure that the very wealthy pay taxes, the AMT was never structured to keep pace with inflation.

So on paper the AMT is scheduled to bring in trillions of dollars in revenue over the coming years because it would capture more and more taxpayers who are not wealthy. But every year Congress passes costly "patches" to protect the middle class from having to pay the AMT, and adds the cost of those patches to the deficit.

It was not immediately clear whether the House GOP plans to replace that forecasted revenue, but it seems unlikely since it is proposing to keep revenues as a share of the economy on par with the 40-year average of 18.1% of the economy's GDP.

Since the financial crisis in 2008, revenues as a share of GDP have hit 60-year lows, coming in at around 15%. And going forward, independent budget experts have said the country may need to bring in more revenue than the historical average to meet entitlement benefit promises and adequately fund programs without slashing too deeply in any one area of the budget.

On the corporate tax side, the House GOP would lower the top tax rate to 25% from 35% and switch the United States to territorial system of taxation, meaning that U.S. multinational companies would only owe tax on foreign-made profits to the government of the country in which the profits were made.

Currently, a U.S. company owes U.S. taxes on foreign profits once the money is brought home, and they can subtract from their Washington tax bill taxes they have already paid to the country where the profits were made. Some estimate that U.S. companies may be parking as much as $1 trillion abroad.

The House GOP proposal on corporate taxes differs from President Obama's. He would lower the corporate tax rate to 28% and impose a minimum tax on foreign-made profits the year they were made to discourage companies from parking money abroad.

And as they have at every turn, House Republicans will reject outright most of Obama's tax proposals for individuals, particularly those on the wealthy, including his proposed Buffett Rule to ensure millionaires pay at least 30% of their income in federal tax. (bridey sez: I need to read more about this proposed Buffett Rule. Does it really want millionaires paying an effective tax rate of 30%, which is what this sentence implies, or does it want to make sure they pay a marginal rate of 30%? Huge difference!)

The emphasis on tax reform in advance of the formal release of the House Republican budget may indicate the GOP's desire to turn the conversation away from their anticipated and polarizing proposals to reform Medicare and to cap discretionary spending at levels lower than the top cap agreed to by both parties last summer.

Democrats have expressed opposition to both prospects.

House Republicans are expected to propose a spending level that is about $20 billion less than that specified by the Budget Control Act, the deal that ended the bitter fight over the debt ceiling in August. If that's the case, that could set off a battle with the Democratic-controlled Senate on federal spending just weeks before the November election.

Meanwhile, the most conservative factions in the House have been pushing for the GOP to propose spending levels lower than those likely to be proposed on Tuesday.

brideymcbriderson · March 2012

The CBO's statement:

At the request of the Chairman of the House Budget Committee, Congressman Paul Ryan, the Congressional Budget Office (CBO) has calculated the long-term budgetary impact of paths for federal revenues and spending specified by the Chairman and his staff. The calculations presented here represent CBO's assessment of how the specified paths would alter the trajectories of federal debt, revenues, spending, and economic output relative to the trajectories under two scenarios that CBO has analyzed previously. Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.

The amounts of revenues and spending to be used in these calculations for 2012 through 2022 were provided by Chairman Ryan and his staff. The amounts for 2023 through 2050 were calculated by CBO on the basis of growth rates, percentages of gross domestic product (GDP), or other formulas specified by Chairman Ryan and his staff. For all years, the Chairman specified that there would be no spending for subsidies to purchase health insurance through new exchanges established under the Affordable Care Act. CBO calculates that, under the specified paths, federal revenues and spending would evolve as follows:

Revenues?from 15? percent of GDP in 2011 to 19 percent in both 2030 and 2050;

Medicare?from 3? percent of GDP in 2011 to 4? percent in 2030 and 4? percent in 2050;

Medicaid and the Children's Health Insurance Program (CHIP)?from 2 percent of GDP in 2011 to 1? percent in 2030 and 1 percent in 2050;

Social Security?from 4? percent of GDP in 2011 to 6 percent in both 2030 and 2050; and

Other mandatory spending and all discretionary spending?from 12? percent of GDP in 2011 to 5? percent in 2030 and 3? percent in 2050.
Under those paths for revenues and spending, federal debt held by the public would be 53 percent of GDP at the end of fiscal year 2030 and 10 percent at the end of fiscal year 2050.

Those figures are compared in this report with updated long-term calculations for two budget scenarios examined in CBO's 2011 Long-Term Budget Outlook; both of those scenarios represent extensions of current laws or policies in different forms. Under those scenarios, federal spending in 2050 would be close to 7 percent of GDP for Medicare (including offsetting receipts); more than 4 percent of GDP for Medicaid, CHIP, and subsidies to be provided through insurance exchanges; 6 percent of GDP for Social Security; and about 8 percent of GDP for other mandatory spending and all discretionary spending. Under one of those scenarios, revenues would rise to about 26 percent of GDP in 2050, and debt held by the public would decline to 40 percent of GDP in that year; under the other of those scenarios, in 2050, revenues would be 18? percent of GDP, and debt held by the public more than 200 percent of GDP.

Higher debt tends to imply lower output and income in the long run than does lower debt, because increased government borrowing generally draws money away from, or "crowds out," private investment in productive capital. As a result, the debt that would occur under the paths specified by the Chairman and his staff would lead to higher national income over the long term than would occur with the higher amounts of debt under the other two scenarios.

The specified paths of revenues and spending would change the federal budget in various ways that differ significantly from historical trends and current policies. The consequences of those changes would depend on both the specific policies that were implemented to generate those paths of revenues and spending and the ways in which the nation's health care and health insurance systems and other parts of the economy evolved in response to those policies.

I really need time to read more about this budget proposal and digest it, but for the first time in years, I am really interested in the budget.

brideymcbriderson · March 2012

I'm just going to keep talking to myself.

From Ezra Klein:

Paul Ryan?s budget would spend $5.3 trillion less over the next decade than President Obama?s budget. Part of this is health care: Ryan would trim Medicare and Medicaid for a portion of his savings. But he?d also spend $2.2 trillion less on everything else. So what, specifically, is Ryan planning to cut?

The clearest way to figure this out is to look at the ?Chairman?s mark?: This is the version of Ryan?s budget that?s in legislative language and gives specific forecasts for spending by government function. You can see them in table form at the end of his bill (pdf) and then compare them with the White House?s Table 32-1 here. Exciting, right?

Over the next decade, Ryan would spend 30 percent less than the White House on ?income security? programs for the poor ? that?s everything from food stamps to housing assistance to the earned-income tax credit. (Ryan?s budget would spend $4.8 trillion over this timeframe; the White House?s would spend $6.8 trillion.) Compared with Obama, Ryan would spend 38 percent less on transportation and 24 percent less on veterans. He?d spend 20 percent less on ?General science, space, and basic technology.? And, compared with the White House, he?d cut ?Education, training, employment, and social services? by a full 44 percent.

So how would this lower spending play out? Let?s take transportation as an example. Right now, the United States is facing a number of pressing infrastructure challenges. The National Highway System, first built in the 1950s, is reaching the end of its natural lifespan. Our air-traffic control system is outdated, causing airport delays around the country. About one-quarter of the country?s bridges are either ?structurally deficient? or inadequate to today?s traffic needs, according to the GAO.

A variety of think tanks and analysts have pegged the cost of fully repairing and upgrading our transportation networks at somewhere between $200 billion and $262 billion per year over the next decade. The White House?s budget envisions spending an average of about $120 billion per year. Ryan?s budget, meanwhile, allocates about $78 billion per year. In his summary, Ryan claims he can meet the country?s needs by cutting back on ?imprudent, irresponsible, and downright wasteful spending,? though it?s not clear what waste Ryan has in mind, much less whether it would make up the large gap.

Alternatively, we can look at what specific cuts might ensue in the near future. Third Way, for instance, has tried to game out the effects of Congrsess? recent debt-ceiling deal on specific government programs. The cuts to domestic spending, if applied across the board, would lead to fewer food inspectors, fewer air-traffic controllers, and so forth. And that would mean more delays and cases of food poisoning, and so forth. And Ryan?s budget, for its part, goes even deeper than Congress?s debt-ceiling deal.

So I asked Third Way?s budget expert David Kendall to run a few numbers for Ryan?s budget. For instance, under Ryan?s plan, spending on transportation would be 26.1 percent lower in 2014 than it is today. If that size cut was applied to, say, air-traffic control programs, Kendall notes, ?there would be 3,092 more flight cancellations and 68,683 delays annually. At the U.S. average of 49 passengers per flight, that?s enough to strand 151,503 more people at the gate and make 3,365,685 more people late every year.?

Likewise, spending on natural resources and the environment will be 14.6 percent lower in 2014 under Ryan?s budget than it is today. Assuming those cuts hit all programs equally ? and, again, this is for illustration purposes ? then, Kendall finds, ?our weather forecasts would be only half as accurate for four to eight years until another polar satellite is launched. For many people planning a weekend outdoors, they may have to wait until Thursday for a forecast as accurate as one they now get on Monday. ? Perhaps most affected would be hurricane response. Governors and mayors would have to order evacuations for areas twice as large or wait twice as long for an accurate forecast.?

Now, obviously, Ryan?s budget may not lead to these exact cuts. Perhaps Congress will go out of its way to shield weather forecasting while cutting something else in the environmental budget even more. But when the cuts are this sharp, Congress can?t shield everything. And Kendall?s analysis is a useful way to make those spending cuts a little more concrete.

I know that spending needs to be reigned in, but I don't see how we handle a growing population (and get our economy to grow) while spending less on transportation. I'm starting to think death panels really are the way to go. Kill off all the olds to avoid Social Security and Medicare payments.

LoveTrains · March 2012

I already got two emails today from subscription lists I am on of liberal/progressive groups denouncing the Repub version of the budget. Their biggest complaint was that it would "radically transform medicare" by forcing more seniors onto private plans.

New GOP budget proposal contains only two tax brackets

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