To the surprise of no one, a new study by Citizens for Tax Justice (CTJ) shows that the budget proposed by Rep. Paul Ryan (R-WI) will overwhelmingly benefit the United States’ top earners.
CTJ is the same research institution that correctly reported just how generous Mitt Romney’s and Ryan’s tax plans would be to the wealthy during the 2012 presidential election. Most notably, CTJ reported about Rep. Ryan’s previous budget proposal, “[The] federal government would collect $2 trillion less over a decade and yet require bottom 90 percent to pay higher taxes.”
At the crux of Ryan’s budget is a promise to implement large tax cuts, while — somehow — not reducing the revenue collected by the federal government. A crunch of the numbers by CTJ shows this is possible only by providing the wealthy with tax cuts and likely offsetting the lost revenue with a tax increase on low earners.
According to the study, there are two notable tax reforms included in Ryan’s budget proposal: a variety of tax cuts, and the closing of tax loopholes and special breaks through a limit on tax expenditures by Congress. While closing tax loopholes is a good talking point for Republicans, it will not pave the way for wealthy Americans to pay a higher income tax rate. In fact, according to the study, Americans who earn more than 1 million dollars a year will average a net tax decrease of $200,000, even with the limit on tax expenditures.
The study shows two scenarios for how the Ryan budget will affect high-income households in the United States. If tax expenditures are limited and loopholes are closed, high-income households will enjoy a significant net tax decrease, as made clear in the below table. In another scenario, the tax expenditures will not be cut and high-income households will benefit from an even larger tax decrease.
Americans who earn far less than $1 million a year will likely not benefit from such a decrease. Because the Ryan budget calls for the federal government to collect the same amount of revenue, a tax increase on lower earners will necessarily have to be implemented.
To top everything off, the Ryan budget calls for a repeal of the Affordable Care Act and all the tax increases associated with the law. The rich would benefit from this as well: The plan would reform the Medicare Hospital Insurance tax, ending the higher rate for high-income earners currently in place.
Photo: Speaker Boehner via Flickr