The central tax reform in Rep. Paul Ryan’s (R-WI) new budget blueprint — which seeks to create just two income tax brackets of 10 and 25 percent — overwhelmingly benefits the wealthy.
The nonpartisan Tax Policy Center crunched the numbers and found that Ryan’s proposal would cost roughly $5 trillion over 10 years. On average, his plan would lower taxes on people making more than $1 million per year by a whopping $400,000. From there the benefits plummet.Incomes between half a million and one million dollars would owe about $50,000 less, on average. People earning between $20,000 and $50,000 would save just hundreds of dollars.
Ryan’s plan also cuts spending by some $4.6 trillion over the next decade, targeting programs like Medicaid and the portion of the budget that includes Pell Grants and food stamps. He insists his tax cuts will spur significant economic growth, and he promises to pay for them by closing unspecified tax loopholes, deductions and credits — ideally on high incomes.
“You can actually plug loopholes and subject more of higher earners’ income to taxation through a lower tax rate,” Ryan said. “We think that’s smarter.”
His promise mirrors that of Mitt Romney during the 2012 presidential election. The problem, as numerous independent experts concluded, is that finding that much revenue in tax expenditures would require raising effective taxes on the middle class.
[Chart by TPM’s Christopher O’Driscoll]