All about ideas…

Rep. Ryan’s tax plan reducing taxes on wealthy while pushing even more tax burden onto middle class

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The Center on Budget and Policy Priorities scored Republican (and Ayn Rand acolyte) Representative Paul Ryan’s budget proposal.

According to the CB&PP, Representative Ryan’s budget proposal

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.[1]

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.[…]

Ryan Plan’s Claims of Fiscal Responsibility Are Unfounded, Tax Policy Center’s Howard Gleckman Explains

“Word is getting around that CBO has blessed a major budget reform plan proposed by Representative Paul Ryan National deficit and debt higher under Rep.Ryan's plan(R-WI) as, in the words of National Review Online, ‘a roadmap to solvency.’ It isn’t true.

“…. All this confusion is due to a letter written on Jan. 27 from CBO director Doug Elmendorf to Ryan. In that 50-page document, CBO suggests the plan could eliminate the deficit in 50 years and, even more impressively, eliminate the debt by 2080.

“But, and this caveat is a whopper, CBO assumed this wonderful outcome would occur only if the revenue portion of Ryan’s plan generated 19 percent of GDP in taxes. And there is not the slightest evidence that would happen. …. Rather than estimate the true revenue effects of the Ryan plan, CBO simply assumed, as the lawmaker requested, that it would generate revenues of 19 percent of GDP (emphasis added).”

— Howard Gleckman, “Assume a Can Opener,” TaxVox, the Tax Policy Center Blog, February 4, 2010, http://taxvox.taxpolicycenter.org/blog/_archives/2010/2/4/4447284.html .

This analysis is not the first I’ve seen of Ryan’s budget proposal. I read Ryan’s plan (412046_ryan_taxplan) a couple of weeks ago. Independent analyses of the plan all agree that Ryan’s plan hurts the middle class by shifting most of the tax burden onto them while reducing the tax burden on the most wealthy in the country – those in the top 1% income bracket. In other words, Ryan’s plan makes the middle class responsible for paying off the deficit and national debt while giving the very wealthy a “get out of jail free card.”

What I don’t understand – maybe because I’m one of those middle class individuals who would pick up the tab for the extremely wealthy – is why this notion of “tickle down” economics continues to exist in tax policy when it so clearly has been discredited.

In reading up on the politics surrounding the Great Depression, I discovered that supply side economics (another term for trickle down economics) was a big factor in the market crash leading to the Great Depression. But public and political memory are short – which partially explains why Reagan’s economic advisers initially advocated a return of this policy.

However, as reality hit, Reagan’s leading advisers turned against “supply side” economics, realizing that giving tax credits and exemptions to the very wealthy did not accrue to higher economic benefits in the form of jobs and higher income to the middle class. Just the opposite occurred. Middle class income stagnated while the wealthy invested in bonds and other financial instruments that lent little to nothing to the real economy.

Clearly Ryan’s – and Rand’s – economic policies do not work. They are based in an ideology that posits the perfection of thinking of the wealthy. It says, in general, that self-interested business executives, because they are logical and rational, will never do anything to harm the overall economy because it would hurt themselves.

What this ideology misses – its fault line – is that people are not necessarily good or rational or logical. As reported during the last two years since the global economic collapse, numerous traders who actively traded the worthless credit default swaps and other risky derivatives said they knew the products they were selling were worthless and hoped to accumulate enough wealth to get out before the market collapsed. That kind of thinking is diametrically opposed to Ayn Rand’s…and Paul Ryan’s…business and economic philosophy of vested self-interest.

In the final analysis, Ryan’s budget proposal is just plain bad for American taxpayers.

[1] Paul D. Ryan, A Roadmap for America’s Future, Version 2.0, January 2010. Available at http://www.roadmap.republicans.budget.house.gov/UploadedFiles/Roadmap2Final2.pdf . The proposal has been introduced in the House as H.R. 4529. Where specifications are unclear, this analysis follows the language of the bill.

Written by Valerie Curl

March 19, 2010 at 8:56 AM

One Response

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