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POLICY INSIGHT
BEYOND THE NUMBERS

Another Look at Rep. Ryan’s “Reverse-Robin-Hood Budget Plan”

With House Budget Committee Chair Ryan scheduled to deliver the Republican response to the President’s State of the Union address tomorrow, this is an appropriate time to take another look at the major budget plan Rep. Ryan announced last year.  (We’ve issued analyses both of the plan as a whole and of its proposed changes to Social Security.) As I wrote earlier, the Ryan plan is a “radical blueprint to shift massive resources from the broad majority of Americans to the very wealthy, while leaving the budget on an unsustainable course for decades.”  Here are the plan’s main features:
  • Large tax cuts for the wealthy but tax increases for the middle class. The plan would give the most affluent households a new round of large tax cuts by reducing the top income tax rates; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax.  To offset some of the cost, the plan would place a new consumption tax on most goods and services, which would increase taxes on most low- and middle-income families.The richest 1 percent of Americans would see their taxes cut in half, and households with incomes above $1 million would receive a $502,000 tax cut each year, on average, according to the Urban Institute-Brookings Institution Tax Policy Center.In contrast, about three-quarters of Americans — those with incomes between $20,000 and $200,000 — would face tax increases.  Households with incomes between $50,000 and $75,000 would pay an extra $900, on average.
  • Massive cuts in Medicare, Medicaid, and Social Security. The Ryan plan would replace Medicare and most of Medicaid with vouchers whose value would erode over time, leaving low-income families, seniors, and people with disabilities less and less able to buy adequate health coverage on their own.The plan also would impose large and growing cuts in Social Security benefits for future retirees relative to current law, in part by raising the full retirement age even more than it is already scheduled to rise.  A medium earner (someone earning $43,000 in today’s terms) retiring in 2080 would receive benefits worth 46 percent less than the currently scheduled amount; a higher earner (earning $69,000) would receive a 56 percent reduction; and someone who earns the maximum taxable amount (currently $106,800) would receive a 61 percent reduction.
  • Debt rising to unsustainable levels. Despite its huge program cuts, the Ryan plan fails to achieve its advertised goal of fiscal responsibility because of its enormous tax cuts for the rich.  Federal debt under the plan would rise over the next several decades to unsustainable levels far in excess of the size of the nation’s economy.Last March, after the Tax Policy Center and the Center on Budget and Policy Priorities demonstrated that revenues under the Ryan plan were inadequate to rein in rising debt, Rep. Ryan wrote, “If needed, adjustments can be easily made to the specified [tax] rates to hit the revenue targets and maximize economic growth.”  Nearly a year later, we’re still waiting for Rep. Ryan to explain how he proposes to make his numbers add up.