Ryan's plan cuts taxes for the rich to their lowest levels in 80 years

[n2doc]

April 8, 2011, 9:48 AM
Ryan and Taxes-Paul Krugman

Today’s column didn’t even mention the tax part of the Ryan plan — 800 words, you know. So, a bit about that.

The Ryan plan calls for cutting the top marginal rate to 25 percent — lower than it has been at any time in the past 80 years. That in itself should tell you that this is a deeply unserious proposal: anyone who tells you that we have to face hard truths, that everyone must sacrifice, and by the way, rich people will pay lower taxes than they have at any time since the 1930s, is just engaged in a power grab.

Beyond that, has anybody besides Bruce Bartlett noticed that Ryan still hasn’t gotten an independent estimate of the revenue losses from his tax plan? Last summer I pointed out that he was getting a free pass on tax cuts that appeared likely to lose a lot of revenue; his defenders came up with all sorts of excuses about how he couldn’t get anyone to do a proper estimate.

But that was 8 months ago, and his plan is now the official plan of the Republican party. At this point, the absence of any independent verification of the claim that he will collect 19 percent of GDP in revenue clearly reflects a deliberate evasive strategy: Ryan and his colleagues don’t want anyone looking at their numbers independently.

The truth is that his plan would almost surely lead to a large rise in the deficit.

http://krugman.blogs.nytimes.com/2011/04/08/ryan-and-taxes/

[valerief]

1. But the most important thing in the world is for rich people to get richer.

Why can't everyone understand that? It's so obvious. God wants them to have everything. Just ask The Family.

[damntexdem]

2. Hey, that gives it a clearly-appropriate name: The Old Deal.

;-)

[liberal N proud]

3. And pays for it by cutting all services to everyone else

[MiniMe]

4. They want to cut spending to the average% of GDP over the last 40-50 years

OK, well then put the tax rates to what the average has been over the last 40-50 years too. You can't just do this by cutting spending, you have to increase revenues too.

[Igel]

5. Paper versus reality.

If the rich were taxed at a straight 20% on all income with sharply limited deductions they'd be taxed at the highest rate in the last 60 years. Yes, in that span were times when the top bracket was well over 80%. Doesn't matter. One can cite marginal rates, one can cite the official maximum rate, but the only number that actually matters is what the de facto rate is, the amount paid for a given amount of income.

That cuts through quibbles over capital gains versus income, tax brackets, deductions and all the rest.

Krugman knows this. But he has a decided point of view--he wants his side to win--and, as with everybody else rooting for a team, what isn't convenient when it comes to defending his team has a hard time being noticed or remembered. It's a problem nearly everybody has: People glibly spout things like "Put taxes on the rich back at 95%", without understanding what that actually meant or what the net revenue stream from that looked like.

That said, I can make neither heads nor tails of what little I've seen of Ryan's proposal.

[n2doc]

6. Political reality means that there will always be loopholes

And that the majority of those will only be accessible to the rich. Like deducting a Hummer off of your taxes as a business expense....

[hfojvt]

7. um, yeah, that's not even close to true

In 1986 the tax rate for the top 1% was 33.13%. Even in 2008, the top .1% were taxed at an average rate of 22.7%, although back in the pre-Bush days they paid an average tax rate of 28.2%.

One of the things about the top rate, is that loopholes were not infinite. Let's say a CEO is making $2 million a year and the top tax rate is 70%. At $2 million, they are already taking advantage of every possible loophole. If somebody offers them $4 million, they are not gonna be able to take a whole bunch more deductions or find more loopholes. They will pay 70% on that next $2 million. Thus, they have less incentive to chase after a higher paying job.

[Clouseau2]

8. They actually have more incentive to chase after the higher paying job

If I want to have a lifestyle where I have my own jet, mansion, etc., and you raise my taxes so I get less income, I will now WORK HARDER to increase my pay, since more of it is being taken by taxes. If my lifestyle costs $1 million a year to maintain, and taxes leave me with $900,000, and I really want the $1 million a year lifestyle, I'll make sure to increase my pay a bit more to get there.

I'm sure eventually if you raise taxes high enough the "no point making more money because it's taxed so much" kicks in, but I'll bet that number is REALLY high. Even if it's taxed at 99%, it still means more money coming in.

Besides, a new perk for CEOs is that the company pays the income taxes for the CEO. And the income taxes on that. And so on.

example