Analysis: GOP fiscal vision prioritizes enormous tax cuts for rich over deficit

Original Link: http://www.washingtonpost.com/blogs/plum-line/wp/2013/03/15/analysis-gop-fiscal-vision-prioritizes-enormous-tax-cuts-for-rich-over-deficit/

By Greg Sargent

The nonpartisan Tax Policy Center has just completed its analysis of the Paul Ryan budget, and it confirms once again just how regressive the GOP fiscal vision really is — and how absurd GOP intransigence on revenues remains. The key finding:

The Tax Policy Center estimates that cutting individual rates to 10 percent and 25 percent, repealing the Alternative Minimum Tax and the tax increases included in the Affordable Care Act, and cutting the corporate rate from 35 percent to 25 percent would add $5.7 trillion to the deficit over the next decade. Thus, if House Republicans want to cut these taxes and still collect the revenues they promise, they’d have to raise other taxes by $5.7 trillion.

In other words, to pay for these tax cuts, the Ryan plan would require nearly $6 trillion in new revenues generated by closing loopholes and deductions. TPC’s Howard Gleckman says it is “hard to imagine” how that sum could be generated, which is to say, it is “hard to imagine” how tax cuts of this size would be paid for.

But there’s another point to be made here. The Ryan plan requires Republicans to find $5.7 trillion in new revenues via loophole closing to pay for these enormous tax cuts, which would hugely and disproportionately benefit the wealthy. But Republican are not willing to agree to cede one-tenth that amount in new revenues to reduce the deficit, to get some of the entitlement cuts they say they want, and to stop the sequester. Remember, Obama’s deficit reduction plan asks for $580 billion in new revenues in exchange for over $900 billion in spending cuts. Obama’s revenue ask is one-tenth the $5.7 trillion Republicans are willing to scrounge up in new revenues to pay for the Ryan plan’s tax cuts. But that one-tenth is too much, even though it would give Republicans the spending cuts they want and would stop the sequester Republicans have said is a threat to the country’s military and economy.

Or consider the budget just offered by Senate Democrats, which calls for $975 billion in new revenues in exchange for $975 billion in spending cuts — which would also stop the sequester. That revenue ask is one-fifth the amount Ryan is calling for in loopholes and deductions in order to pay for his plan’s huge tax cuts. Obviously that, too, is unacceptable to Republicans — again, even though this would stop the sequester they say is a threat to the country’s military and economy.
Oh, and to what extent do the Ryan tax cuts benefit the rich? To this extent:

The tax cuts described in Ryan’s budget would generate a huge windfall for high-income taxpayers. On average, households would get a cut of $3,000. But those in the top 0.1 percent of income, who make $3.3 million or more, would get a whopping $1.2 million on average — a 20 percent increase in their after-tax income.
By contrast, middle-income households would get an average tax cut of about $900. Those in the bottom 20 percent (who make $22,000 or less) would get $40 and one-third of them would get no tax cut at all. 

An average of more than $1 million in tax rate cuts — a 20 percent increase in after tax income — for those in the top 0.1 percent who make over $3.3 million a year! That illustrates just how regressive this plan really is.

Remember, according to the Center on Budget and Policy Priorities, Ryan’s tax rate cut for the richest is twice the size of the one proposed by Mitt Romney. That’s because the baseline now — current law — is the 39.6 percent rate the top earners pay, thanks to the tax hike in the fiscal cliff deal. Ryan’s plan would cut that rate from 39.6 percent to 25 percent. In the process, it would require a truly enormous amount of revenues to be generated elsewhere to pay for it.

If Republicans agreed to turn over a small fraction of that sum towards deficit reduction, that would enable scenarios that would turn off the sequester. But since Republicans have adamantly declared that no new revenue must be raised, no matter what, this is a nonstarter. Everything that’s raised from closing loopholes has to go only to cutting tax rates, including a huge tax rate cut for the super rich, and not to paying down the deficit or ending destructive sequestration. I don’t know if there’s any way to illustrate more clearly than this what’s really going on here.