In slashing federal spending and revenues, he would crimp Medicare into a voucher system, undermine Social Security with privatization, and abolish the corporate income, estate, and alternative minimum taxes. He proposed cutting $5 trillion in spending over a decade, severely harming Medicaid and food stamps while fattening the Pentagon budget. Oh yes, he would kill the Affordable Care Act that is now helping 16 million Americans.
What’s In The Ryan Plan?
So, what’s in the plan? You need to distinguish between the first decade, before the phasing out of Medicare as we know it begins, and after.
The first decade
In the first decade, the big things are (i) conversion of Medicaid into a block grant program, with much lower funding than projected under current law and (ii) sharp cuts in top tax rates and corporate taxes.
Is this a deficit-reduction program? Not on the face of it: it’s basically a tradeoff of reduced aid to the poor for reduced taxes on the rich, with the net effect of the specific proposals being to increase, not reduce, the deficit. Yet Ryan claims a big deficit reduction, via two big “magic asterisks”. First, he insists that the tax cuts won’t reduce revenue, because they’ll be offset with unspecified “base-broadening”. Here’s the CBO explanation:
The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff. The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028 and remains at that level thereafter. There were no specifications of particular revenue provisions that would generate that path.
Howard Gleckman of the Tax Policy Center calls these unspecified sources of revenue “mystery meat”, and strongly suggests that nothing like this would actually happen.
Can Republicans Avoid the Romney Tax Trap?
But Mr. Carson has been open about the fact that his plan would raise taxes on some lower earners. He said on “Fox News Sunday” this month that it was “condescending” to argue poor people could not afford to pay the same tax rate as rich people.
.. Senator Marco Rubio has endorsed a plan that tosses aside any commitment to revenue neutrality. It would reduce revenue by trillions of dollars over a decade by cutting rates, abolishing taxes on capital gains and dividends and creating a new tax preference for business owners. Mr. Rubio told reporters in March, “I’ve never believed that tax reform by itself should pay for itself.”
.. Given his family history with “Read my lips, no new taxes,” it’s no surprise Mr. Bush would be hesitant about tax promises. The question is whetherG.O.P. primary voters, used to promises of deep tax cuts, yet desirous of higher military spending and wary of old-age entitlement cuts, will allow a candidate to dance around their unreasonable expectations — or whether they will push their nominee into promises that prove unpopular in a general election.
Tax Cuts Still Don’t Pay for Themselves
You might think a cut in taxes on investment would increase returns to investors in the long run. But the Tax Foundation’s model says that isn’t so — instead, it assumes investment would rise as much as was necessary to bid down pretax returns so that aftertax returns were unchanged. For example, automakers would pay a lower tax rate, but they’d make more cars, flooding the market until profit margins fell enough to fully offset the benefits of the tax cut. This assumption is how the Tax Foundation reaches the conclusion that Rubio-Lee would drive an enormous increase in investment.