Congress’ Joint Committee on Taxation (JCT) has now confirmed earlier Tax Policy Center estimates of just how much it would cost to achieve the dual tax rate goals of the House-passed budget resolution proposed by House Budget Committee Chairman Paul Ryan — and it’s not pretty. Specifically, cutting the top individual and corporate rates to 25 percent would cost $5.1 trillion over ten years (see chart). (These figures do not include the additional cost of the Ryan budget’s proposal to repeal the tax measures that were enacted under health reform.)
While the Ryan budget specified its tax rate cuts, it did not specify one dime in offsetting savings from scaling back tax expenditures (deductions, credits, and other preferences). In fact, in recent months key Republicans have backed away from proposals to curb some of the largest tax expenditures, including the mortgage interest and charitable giving deductions, and the exclusion for employer-provided health insurance.
This combination sets a classic tax reform trap: specific — and regressive — tax rate cuts, which will dig a huge revenue hole, but no plan for how to pay for them.
The new JCT numbers are the latest and starkest reminder of how difficult tax reform math is and that the House budget has it backward. Rate cuts for the nation’s richest people should come last, not first. We should first raise enough revenue, in a progressive way, and combine it with corresponding spending cuts for a balanced approach to long-term deficit reduction.