The Tax Policy Center estimated Friday that the tax provisions of the budget plan introduced this week by House Budget Committee chairman Paul Ryan, R-Wis., would reduce tax revenues by $5.7 trillion over a 10-year period, requiring a corresponding amount of tax increases and/or spending cuts to keep it “revenue neutral,” or risk a substantial expansion of the budget deficit.
As in the previous two budget plans he has introduced, Ryan’s budget blueprint, dubbed “The Path to Prosperity,” does not specify any tax breaks he would end to simplify the Tax Code (see Congressional GOP and Democrats Outline Competing Budget and Tax Plans). Ryan wants to shrink the number of individual income tax brackets from seven to two brackets of 10 and 25 percent, as well as cut the top corporate income tax rate from 35 to 25 percent. Ryan also called for repealing the alternative minimum tax and President Obama’s signature health care reform law.
The Tax Policy Center, which operates under the auspices of the Brookings Institution and the Urban Institute, estimated that the tax savings from the specified provisions in Ryan’s plan would disproportionately benefit higher-income households. Overall, taxes would fall by an average of $3,000 per tax unit in 2015, raising after-tax incomes by about 5 percent. Meanwhile, households in the middle quintile would save an average of about $900, lifting their after-tax income not quite 2 percent. Households in the lowest quintile would get tax cuts averaging just $40, or about 0.3 percent of their after-tax income.
In addition, households in the top quintile would get average tax cuts of more than $16,000, increasing their after-tax income by more than 8 percent. Households in the top 1 percent—those with income over about $575,000—would see their taxes fall an average of more than $225,000 and their after-tax income rise by 7 percent, the think tank estimated. The top 0.1 percent of Americans would see average tax cuts of $1.2 million.
The average millionaire would reap a $408,000 tax cut under Ryan’s proposal to reduce the top individual tax rate from 39.6 percent to 25 percent. The overall tax cuts in the Republican budget would add an additional $5.7 trillion to the deficit, according to the nonpartisan Tax Policy Center, with the individual rate reductions alone responsible for ballooning the deficit by $3.5 trillion.
“The Republican budget would mean a huge tax cut for the very wealthy and leave a nearly $6 trillion hole in the deficit that would lead to tax increases for middle-income families,” said House Ways and Means Committee ranking Democratic member Sander Levin, D-Mich., in a statement. “It moves in the opposite direction of the fiscal cliff deal at a time when income inequality continues its rapid rise in our nation. It would tie tax reform into knots.”
The House Budget Committee approved Ryan’s budget plan on Thursday. “I’m proud of my colleagues for working together to write this budget,” Ryan said in a statement. “We owe the American people a responsible, balanced budget. And for the third straight year, we’ve delivered. Our plan balances the budget in just 10 years—without raising taxes. We’ve got to stop spending money we don’t have. By balancing the budget, we will promote a healthier economy and help create jobs. But a balanced budget is a means to a larger end: the well-being of the people. Our budget will give economic security to families and seniors. It will repair the safety net for the poor. And it will expand opportunity for all.”
“I understand not everyone shares our view,” he added. “And I respect that difference of opinion. If the President and Senate Democrats disagree with our plan, they should offer their own. I’m happy to see the Senate Democrats have written a budget. The only problem is, it doesn’t balance—ever. It simply takes more from hardworking families to spend more in Washington. And we’re still waiting for the President to submit a budget, though he’s already six weeks late. Tonight, we took an important step toward achieving the reasonable goal of a balanced budget. We look forward to engaging the full House in this debate next week. I invite the President and Senate Democrats to join in the effort.”
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access