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Ryan's Plan Doesn't Deliver

Ruth Marcus on

The mother of all tax expenditures -- the tax-free treatment of employer-sponsored health insurance -- amounts to $2 trillion over 10 years in lost income-tax revenue, not including the additional impact on payroll tax collections. Special tax treatment to encourage retirement savings, another $1.8 trillion. The deduction for mortgage interest, $1.6 trillion.

Pause to ask yourself: are Ryan and his fellow Republicans going to tell people they have to pay tax on the value of their health insurance? Take away their tax-free retirement savings? Repeal the mortgage interest deduction?

(Hint: if you think that's a possibility, consider the pitched battle, during the health care debate, over subjecting only the Cadillac-iest of health care plans to a tax. Or the fate, dead on arrival, of the Obama administration's repeated budget proposals to limit -- only limit, not eliminate -- the value of deductions for the wealthiest taxpayers.)

Next comes the lower tax rate for dividends and capital gains, $1 trillion over 10 years. But that is a non-starter for Ryan & Co., who treat lower rates for investment income as a sacred principle.

The deduction for charitable contributions, the deduction for state and local taxes, the tax-free treatment of capital gains at death each amount to about $600 billion over the 10-year period. Are Ryan & Co. going after these?

 

As I said at the start, the tax base should be broadened -- both to lower rates, as Ryan proposes, and to raise new revenue, as he recoils from.

The Bipartisan Policy Center's Debt Reduction Task Force, chaired by former Office of Management and Budget Director Alice Rivlin, a Democrat, and former Senate Budget Committee Chairman Pete Domenici, a Republican, took a brave stab at this in its debt reduction plan. It came up with $3.8 trillion in savings by eliminating or pruning all of the above, and more.

By contrast, Ryan's tax plan fails the basic test of responsibility. If Ryan and his colleagues have a workable proposal to cut tax rates that dramatically without losing badly needed revenue, let's see it. If not, they should stop dangling glittery, expensive promises without showing how they plan to deliver.


Copyright 2012 Washington Post Writers Group

 

 

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