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Rep. Ryan’s Reverse-Robin-Hood Budget Plan

Rep. Paul Ryan and his budget plan are getting a lot of respectful attention in the press.  (See here and here.) New York Times columnist Matt Bai suggests Ryan’s plan might represent “the starting point in what could be a serious negotiation about entitlements and spending.”  But a careful look at the plan shows it to be 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.

Tax cuts for the wealthy; tax increases for the middle class. The Ryan 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 tax cuts for those at the very top would be historic.  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.

Debt would grow for decades despite massive program cuts. The Ryan plan would partially privatize Social Security and 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.  Yet despite these huge cuts, the 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.

In 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.”  More than five months later, we’re still waiting for Rep. Ryan to explain how he proposes to make his numbers add up.