The House has passed a Republican-sponsored budget alternative to President Obama’s fiscal 2013 budget, mostly based on the plan put forward by House Budget Committee Chairman Paul Ryan, R-Wisc., for creating only two tax brackets of just 10 and 25 percent.
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Ryan introduced his budget plan only a little over a week ago, although it largely hewed toward the plan he put forward last year (see House GOP Proposes Tax Bracket Consolidation). The House passed the bill in a 228-191 vote, mostly along party lines.
The Ryan budget plan builds on the plan he introduced last year, in a document entitled “The Path to Prosperity,” which set the maximum individual and corporate tax rates at 25 percent, down from a top rate of 35 percent (see House Republicans Aim to Lower Top Tax Rate to 25%). The Republican-led House passed Ryan’s budget plan last year, but it went nowhere in the Democratic-controlled Senate.
“Our budget returns power to individuals, to families, and to communities,” said Ryan in a floor speech Thursday. “As these choices become clear, today’s budget is a vote of confidence in the American experiment: We think that putting our trust in the American people will renew their trust in us. We think Americans should control their destinies – and we trust them to make the right choice about the future of our country.”
The plan would partially privatize Medicare through a so-called “premium support model,” although unlike Ryan’s plan from last year, retirees would also have the option to remain in the current fee-for-service model. However, Democrats remained largely opposed to the bill.
“We call upon our Republican colleagues to work with us on a budget that reflects our values,” said House Minority Leader Nancy Pelosi, D-Calif. “We must work together to protect and strengthen Medicare. We must put people back to work and build a broadly shaped prosperity for all Americans. We must ‘Make It In America,’ to stop the erosion of our manufacturing base. We must rebuild America, putting people back to work. We must do this with community involvement. And all of these things strengthen the middle class, which is exactly what our Democratic alternative achieves.”
Ryan’s budget plan also would repeal President Obama’s signature health care reform law. Ryan has also proposed setting up a trigger that would require work on Social Security reforms when the balance in the trust fund approaches a 75-year deficit.
House Ways and Means Chairman Dave Camp, R-Mich., said the tax plan included in the budget, as provided by the Ways and Means Committee, creates an environment for greater innovation, investment and job creation. Camp has backed a move toward a “territorial” tax system in which corporations would only be taxed on the profits they earn in the U.S. “The Ways and Means Committee will continue to work towards comprehensive reform that not only makes our code flatter, fairer and simpler, but also provides employers and families with the certainty they need to plan for the future," he said.
The budget seeks to cut the federal workforce by 10 percent, extend the federal pay freeze to a total of five years, and cut federal pensions by $112 billion. The federal workforce, through the two-year pay freeze, has already contributed $60 billion to deficit reduction over a decade, the National Treasury Employees Union pointed out, while $15 billion from higher pension contributions for new employees was used to offset part of the payroll tax holiday extension legislation.
“This budget resolution attacks the very people who protect our nation’s ports and borders, keep our food and medicines safe, ensure that the air we breathe and water we drink are clean, safeguard our nation’s financial institutions, and provide so many other services that our nation depends on,” said NTEU president Colleen M. Kelley in a statement. “Those who support this budget fail to acknowledge that middle-class federal employees are suffering like much of the rest of America, while they instead promote further tax cuts for the millionaires, billionaires and corporations that send jobs overseas.”
As with last year's budget, this year's Republican budget bill is not likely to get very far in the Democratic-controlled Senate. Senate Finance Committee chairman Max Baucus, D-Mont., pointed out the incongruities in the bill. "Under the House plan, millionaires would receive an average tax cut of at least $150,000," he said. "Meanwhile, seniors would eventually have to pay nearly $6,000 more for their health care. That’s a big increase when the average senior has a fixed income of only $25,000 a year. Most Americans would agree that this doesn’t pass the smell test."