Jan 23, 2011

FACT CHECK: The Ryan Budget is a Bad Deal for Middle Income Americans

On Meet the Press this morning, Republican Leader Eric Cantor said that Republicans support the Ryan Road Map.

When David Gregory asked Cantor about Budget Committee Chairman Ryan's "draconian cuts" and said that "Republicans don’t stand behind him," Republican Leader Cantor quickly said, "That’s not true, we devoted a chapter in our book about it, the direction the road map goes is something we need to embrace."

FACT: The Ryan Budget is good for corporations and the wealthiest people at the expense of hardworking, middle income Americans.

  • Ryan Budget eliminates income taxes on corporations and investments earned on Wall Street
  • Ryan Budget gives tax breaks to wealthiest Americans
  • Ryan Budget increases taxes on middle income Americans
  • Ryan Budget increases the debt

Ryan Budget Would Eliminate Income Taxes on Corporations And Investments Earned on Wall Street

According to the Center on Budget and Policy Priorities, the Ryan Budget would eliminate income taxes on corporations and investments earned on Wall Street. The CBPP says the Ryan proposal would make sweeping changes to the federal tax system. It would:

  • Repeal the corporate income tax and replace it with an 8.5-percent value-added tax, a form of sales tax on most goods and services
  • Entirely exempt capital gains, dividends, and interest from taxation

[Center on Budget and Policy Priorities, http://www.cbpp.org/cms/index.cfm?fa=view&id=3114#_ftn3, accessed 9/1/10]

Ryan Budget Would Lower Taxes For Wealthiest Americans

According to the Center on Budget and Policy Priorities, the Ryan Budget would dramatically lower taxes for the wealthiest Americans, while increasing the tax burden for middle-income groups. According to the estimates the Tax Policy Center issued this week, average tax cuts under the plan would equal:

  • $1.7 million a year for the highest-income 0.1 percent of Americans (those with incomes over $2.9 million a year in 2009 dollars)
  • $502,000 a year for people with incomes over $1 million
  • $280,000 a year for people in the top 1 percent of the population (those with incomes over $633,000)

[Center on Budget and Policy Priorities, http://www.cbpp.org/cms/index.cfm?fa=view&id=3114#_ftn3, accessed 9/1/10]

Middle Class Families Would Pay Higher Taxes, $788

According to the Center on Budget and Policy Priorities, the Ryan Budget would raise taxes on the bulk of taxpayers. According to the CBPP, those, “with incomes between $20,000 and $200,000 — would see their taxes go up. For example, those with incomes between $40,000 and $50,000 would see their taxes rise by an average of $788.”

[Center on Budget and Policy Priorities, http://www.cbpp.org/cms/index.cfm?fa=view&id=3114#_ftn3, accessed 9/1/10]

Ryan Budget Increases Debt

According to the Center on Budget and Policy Priorities, the Ryan Roadmap would allow debt to increase.

As a result of its costly new tax cuts for the wealthy, the Ryan plan would allow the federal debt to continue rising in relation to the size of the economy for at least four decades. Even in CBO’s analysis of the Ryan plan, which assumed — as Ryan’s staff specified but the Tax Policy Center has found to be incorrect — that revenues would not fall below their projected levels under current tax policies until after 2030, the federal debt would grow as a share of GDP until 2043, and the budget would not reach balance until 2063. Under the much more realistic revenue estimates that the Tax Policy Center has prepared, the budgetary outlook under the Ryan plan would be substantially worse.

Using TPC’s new revenue estimates, we estimate that the budget deficit under the Ryan plan would reach about 7 percent of GDP and the debt would grow to 90 percent of GDP by 2020. TPC estimates that revenues under the Ryan plan would average 16.3 percent of GDP over the period from 2011 through 2020.

In contrast, following the specifications provided by Rep. Ryan’s staff, the CBO analysis assumed that revenues over the same period would average 18.4 percent of GDP. That difference amounts to a loss of almost $4 trillion in revenues over the next decade. As a result of these lower revenues, federal interest costs would also be much higher than those shown in the CBO analysis.

Extrapolating TPC’s revenue estimates beyond 2020 shows that the Ryan plan would fail to stem the rising tide of debt for years to come. [5] The debt would continue to grow in relation to the size of the economy for at least 40 more years — reaching over 175 percent of GDP by 2050. (See Figure 1.) Even by 2080, the debt would still equal about 100 percent of GDP. [6] [Center on Budget and Policy Priorities, http://www.cbpp.org/cms/index.cfm?fa=view&id=3114#_ftn3, accessed 9/1/10]


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