CPBB: The Ryan Budget's Radical Priorities

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The Ryan Budget's Radical Priorities

Provides Largest Tax Cuts in History for Wealthy, Raises Middle Class Taxes, Ends Guaranteed Medicare, Privatizes Social Security, Erodes Health Care

By Paul N. Van de Water

I. Summary

The Roadmap for America’s Future, which Rep. Paul Ryan (R-WI) — the ranking Republican on the House Budget Committee — released in late January, calls for radical policy changes that would result in a massive transfer of resources from the broad majority of Americans to the nation’s wealthiest individuals.

The Roadmap would give the most affluent households a new round of very large, costly tax cuts by reducing income tax rates on high-income households; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax. At the same time, the Ryan plan would raise taxes for most middle-income families, privatize a substantial portion of Social Security, eliminate the tax exclusion for employer-sponsored health insurance, end traditional Medicare and most of Medicaid, and terminate the Children’s Health Insurance Program. The plan would replace these health programs with a system of vouchers whose value would erode over time and thus would purchase health insurance that would cover fewer health care services as the years went by.

The tax cuts for those at the very top would be of historic proportions. A new analysis by the Urban Institute-Brookings Institution Tax Policy Center (TPC) finds:

The Ryan plan would cut in half the taxes of the richest 1 percent of Americans — those with incomes exceeding $633,000 (in 2009 dollars) in 2014.
The higher one goes up the income scale, the more massive the tax cuts would be. Households with incomes of more than $1 million would receive an average annual tax cut of $502,000.
The richest one-tenth of 1 percent of Americans — those whose incomes exceed $2.9 million a year — would receive an average tax cut of $1.7 million a year. These tax cuts would be on top of those that high-income households would get from making the Bush tax cuts, which are due to expire at the end of 2010, permanent.

To offset some of the cost of these massive tax cuts, the Ryan plan would place a new consumption tax on most goods and services, a measure that would increase taxes on most low- and middle-income families. TPC finds that:

About three-quarters of Americans — those with incomes between $20,000 and $200,000 — would face tax increases. For example, households with incomes between $50,000 and $75,000 would face an average tax increase of $900. (These estimated changes in taxes are relative to the taxes that would be paid under a continuation of current policy — i.e., what tax liabilities would be if the President and Congress make permanent the expiring 2001 and 2003 tax cuts and relief from the alternative minimum tax.)

The plan would shift tax burdens so substantially from the wealthy to the middle class that people with incomes over $1 million would face much lower effective tax rates than middle-income families would. That is, they would pay much smaller percentages of their income in federal taxes.

Because of the Ryan plan’s enormous tax cuts for the affluent, even the very large benefit cuts that the plan would make in Medicare, Medicaid, and Social Security — and the plan’s middle-class tax increases — would not put the federal budget on a sustainable course for decades. The federal debt would soar to about 175 percent of the gross domestic product (GDP) by 2050. In contrast, most fiscal policy analysts recommend that the debt-to-GDP ratio be stabilized within the next ten years, and at a far lower level.

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(Emphasis mine.)

http://www.cbpp.org/cms/index.cfm?fa=view&id=3114