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Covering Up for Representative Ryan

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Sunday, 15 April 2012 07:44

David Leonhardt wrongly told readers that:

"Mr. Ryan’s plan would cut the top rate to 25 percent, from 35 percent, and still leave overall tax collection roughly where it has been, by eliminating tax breaks."

Ryan claims that his plan would leave tax collections roughly where it has been, however he has never identified a set of tax breaks that he is prepared to eliminate to accomplish this result. In fact, Ryan has explicitly ruled out two touching of the biggest tax breaks, which largely affect the rich, the special treatment of capital gains and dividends.

To get anywhere close to revenue neutrality without touching these tax breaks would require eliminating almost all the tax breaks that benefit the middle class, like the mortgage interest deduction, the deduction for employer provided health care, and the deduction for charitable contributions. This would amount to a massive transfer from the middle class to the wealthy.

While Leonhardt cites a poll showing widespread support for tax reform, it is unlikely that many people would support a reform that meant that they paid thousands more in taxes each year so that Mitt Romney and Warren Buffet could pay less. This outcome is only plausible if the media do not accurately inform voters about what is at stake.

Comments (9)Add Comment
Tax breaks benefit higher incomes more.
written by AndrewDover, April 15, 2012 8:34

The idea that removing the mortgage interest or charitable deductions would cause "a massive transfer from the middle class to the wealthy." is not born out by the statistics on who benefits from these deductions:

Of the $36 billion in charitable deductions, $31 billion goes to those with incomes over $100,000. p49

Of the $82 billion in mortgage interest deductions, $64 billion goes to those with incomes over $100,000. p53”

Of the $23 billion in real estate tax deduction, $17 billion goes to those with incomes over $100,000. p48

Of the $39 billion in state/local tax deduction, $33 billion goes to those with incomes over $100,000. p49

Only 28 million returns (18%) have income over $100,000 from a total of 155 million returns. pg 47

"Estimates Of Federal Tax Expenditures For Fiscal Years 2011-2015"
http://www.jct.gov/publication...wn&id=4385




p.s.
In fuller context, David Leonhardt also points out the tax breaks to be identified later:

"Mr. Ryan’s plan would cut the top rate to 25 percent, from 35 percent, and still leave overall tax collection roughly where it has been, by eliminating tax breaks.

What’s missing from these plans is any detail on which tax breaks would be eliminated."
Yep, removing these deductions would hit the middle class
written by dean, April 15, 2012 9:15
Andrew,

you've just documented more than $35 billion tax increases on families earning less than $100k a year and you didn't even count the deduction for employee provided health insurance. Furthermore, I would be willing to bet that more than half of the deductions listed go to those below the top 2 percent. In short, you are helping to document the case that the Ryan plan is a massive redistribution of tax burdens from the wealthy to the middle class.
Ratio of benefits matters.
written by AndrewDover, April 15, 2012 2:13
When you wrote:
"This would amount to a massive transfer from the middle class to the wealthy."

if you meant "this" to be the likely Ryan plan, I would agree with you. I read "this" to be mean removal of tax deductions, and perhaps you would agree with me that removal of these four deductions would make the tax system more progressive.

We also agree that not taxing employee provided medical insurance is not as skewed towards higer incomes as the others.

I agree that the top 2% don't get 50% of the benefits from the four deductions listed. A little bit of interpolation shows that half the benefits go to returns with incomes over around $180,000. That is probably about 5% of all returns, considering that only 3.8% have income over $200,000.

Over $100,000(18% ) = $145 = 85%
Over $180,000(~5% ) = ____ = 50% as an estimate
...
written by AndrewDover, April 15, 2012 2:19
The data for $200,000 and above:

29 Mortgage interest
21 Charitable
19 State/local tax
5 Real estate tax
===
74 of the 170 or 43% of total benefits.

There are 6 million returns at $200,000 or above, or 3.8% of the total 155 million returns. Adding a few prodcues the estimate of 5%.
& Then A Miracle Occurs
written by Donald Pretari, April 15, 2012 3:04
Saying you will provide the Cuts Later is the Equivalent of using & Then A Miracle Occurs in a Mathematical Proof or Physics Explanation.
Transfers
written by David, April 15, 2012 5:57
Andrew, If the
Transfers
written by David, April 15, 2012 6:01
Ryan is just employing a typical negotiation strategy (push the agenda to the extreme right so that the settlement is farther to the right than it would have been otherwise, coupled with a typical marketing strategy that markets manure as fertilizer.
Tax Breaks obviously help the wealthy
written by H-Bob, April 16, 2012 12:17
FICA raises 80% of the revenue that is raised by the federal income tax system. Since the income tax has higher rates than FICA and taxes income over ~$106K, the tax breaks have a huge impact if the income tax system raises only 20% more than FICA. While I disagree with Ryan's proposal and most of the justifications for a flat tax, it does seem that a flat tax of 28% (with a credit for FICA taxes) would raise more than enough tax revenue. Some adjustments, like a more generous EIC and larger standard deduction, could lower the effective rate for lower-income people.
...
written by AndrewDover, April 16, 2012 4:34

In 2011, Individual Income taxes raised 1,091,473,000 and Social insurance taxes raised 818,792,000 or about 80% as much as INDIVIDUAL, not total, income taxes.

http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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