If the votes could ever be found to pass it, Paul Ryan’s $4.4 trillion deficit cutting plan would affect the life of every American. But no proposal in Ryan’s massive overhaul of federal spending would be as quickly felt as taxes.
In short: he cuts rates dramatically, while ending exemptions to keep the overall package revenue neutral.
The proposal, months in the making and dubbed the “Path to Prosperity,” would simplify and streamline the tax code, holding personal income-tax rates at 10% for adjusted gross incomes of $50,000 for individuals and $100,000 for joint-filers. Anyone who earned more would pay taxes at a 25 percent rate. He offers what he calls a “generous” personal deduction and other exemptions that he estimates would equal about $39,000 for a family of four. He would eliminate the alternative minimum tax, as well as taxes on unearned interest, capital gains and dividends. Ryan would also “eliminate nearly all existing tax deductions, exclusions, and other special provisions,” his website says, except for a new health care tax credit.
Ryan’s proposal would replace the corporate tax — currently set at a nominal rate of about 35% — with a “consumption tax” of roughly 8.5%. The lowered rate, Ryan argues, would move companies to resume hiring – and stimulate economic growth. He says his plan would create some one million new private-sector jobs in the next year, and reduce the unemployment rate to 4% by 2015, but those numbers are based on questionable research from the conservative Heritage Foundation.
Democrats and a few Republicans, including Sen. Tom Coburn, have argued that tax reform should increase net revenues, now approaching historic lows, in order to help decrease record deficits. Ryan’s plan spreads the pain elsewhere. But unlike other elements of the proposal, almost everyone agrees that streamlining tax laws is necessary.
Shortly after Tuesday’s press conference, the chairman of the House Ways and Means Committee, Rep. Dave Camp, issued a statement saying, “the tax code is simply too complex and too burdensome for individuals, families and employers.”