Some details are now dribbling out on the House Republican budget, authored by Rep Paul Ryan.
According to the WSJ, their budget reduces the tax schedule faced by American households to two rates: 10% and 25%; the corporate rate comes down to 25% (currently, there are six rates, ranging from 10% to 35%; the top corporate rate is 35%).
Two very important things to consider here. First, according to the link above, the Ryan budget claims it will pay for the lower rates by closing loopholes currently in the code, but it doesn’t say which ones. Neither does it say the income levels to which the two brackets apply. In other words, it’s unscorable.
It is not hard to cut rates and generate savings with massive magic asterisks like this. And, for the record, both sides do it. But it’s hard to take such dramatic tax changes seriously without more details.
Second, it’s not two versus six rates that makes the tax system way too complicated. It’s all the different income definitions, the trillion per year in tax expenditures, the special provisions like the “carried interest” loophole, that lets hedge fund managers have a tax rate of 15% instead of 35% on their earnings. Simplify that part of the code—treat income as income, regardless of the source—and it really doesn’t matter how many rates you have; you’ll be able to figure out your tax liability in minutes.
More to come as more facts come out on the House budget, but from what I’ve read so far, it’s a lot like last year’s version: big spending cuts on health care and the safety net to pay for big tax cuts tilted toward the wealthy—and, of course, no new revenue. In that sense, it provides a useful contrast between the R’s priorities and those presented in the President’s budget of a few weeks ago. Recall that his budget combined both spending cuts and new revenue measures. I simply don’t see how we maintain a government able to meet the current and forthcoming challenges we face—demographic, climate, global, competitiveness—on spending cuts alone.