Plus   Neg

Republican Budget Plan Would Raise Taxes On Middle Class: Report


While Republican Rep. Paul Ryan's, R-Wis., proposed budget plan calls for lowering tax rates for all Americans, a report from Democrats on the Joint Economic Committee claims that the proposal would give large tax cuts to the wealthiest Americans while increasing the tax burden on the middle class.

The budget proposal from Ryan, the Chairman of the House Budget Committee, calls for the current tax code to be replaced by just two tax brackets - 10 percent and 25 percent, with the top rate down from the current 35 percent.

The JEC report, titled "Winners and Losers: Understanding the Ryan Plan's Potential Tax Implications for America's Workers," found that the top 0.1 percent of households would receive an estimated average federal tax cut of nearly $1.2 million in 2015 under the Ryan plan.

Additionally, the plan would lead households making more than $1 million a year to see a decrease in taxes of about $393,664.

The reduced rates would also lower taxes for households making between $50,000 and $100,000 by about $3,138 and for households making between $100,000 and $200,000 by about $7,688.

However, in order to offset the cost of the lower rates, the JEC report found that Ryan would potentially have to eliminate tax expenditures that deliver significant tax benefits to middle-class workers.

The potential targets include tax deductions for mortgage interest, state and local taxes, and charitable contributions as well as tax exclusions for employer-sponsored health insurance benefits and contributions to 401(k) plans.

The JEC report claims that eliminating those tax expenditures would increase taxes for a household making between $50,000 and $100,000 by at least $1,358.

While households making between $100,000 and $200,000 would also see a tax increase of about $2,681, a household making more than $1 million would still see a net reduction in taxes of about $286,543.

Democratic Sen. Bob Casey, D-Penn., Chairman of the JEC, said, "This new JEC report makes clear that the middle class will be hit hard by the Ryan proposal."

"To pay for his tax cuts, Chairman Ryan has no choice but to eliminate or drastically reduce tax benefits that help middle-class families meet their health care needs, pay for their homes, and save for their retirement," he added. "This is the wrong approach."

However, a post on the website of conservative activist Grover Norquist's Americans for Tax Reform claimed that the JEC's analysis contains a fatal flaw, calling the report "fraudulent."

The post from ATR Tax Policy Director Ryan Ellis noted that the Ryan budget targets tax revenues in the range of 18 to 19 percent of GDP rather that the current law baseline closer to 21 percent of GDP.

"When you're trying to raise more tax revenue in either case with a top tax rate of 25 percent, the extra money has to come from additional base broadening," Ellis wrote. "That additional base broadening, by definition, would have to come from further down the income spectrum."

He added, "But none of this matters because this isn't the House GOP budget's tax plan. It's a Frankenstein's monster version of it, neutered of its revenue-neutral features."

Republican presidential candidate Mitt Romney has embraced the Ryan budget plan but has been reluctant to specify which tax deductions he would limit or eliminate.

Meanwhile, President Barack Obama has called for increased taxes on wealthy Americans in order to help address the budget deficit.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

Business News

Follow RTT