Tax Fantasy
NYT editorial
Congressman Paul Ryan, the author of the House Republican budget, is not the first politician to go long on promises and short on details. But his budget, which passed the House last week with no Democratic votes, takes untruth in taxes to a new level.
Mr. Ryan claims that he can drastically cut income tax rates without adding to the deficit, but he hasn’t specified how he would make up the lost revenue, an estimated $4.6 trillion over 10 years. Instead, he has said he would end or reduce unnamed deductions, exemptions and loopholes and defended this dodge by saying that he first wants to build consensus for the concept of pairing lower rates with fewer write-offs. That’s already a mainstay of many tax reform plans.
The problem is that politicians’ most cherished constituencies are big recipients of the most cherished tax breaks — including the exclusion for employer-provided health insurance; deductions for mortgage interest, state and local taxes and charitable donations; tax deferral for retirement savings; and special low taxes on investment income. With some 70 percent of an annual $1.1 trillion in tax breaks flowing to the top 20 percent of taxpayers, and 20 percent going to the middle rung, politicians are loath to champion the end of specific tax breaks.
Another problem is that ending tax breaks would not end the need for government to help with many of the activities subsidized by the tax code, like employee health insurance and retirement savings. Tax subsidies may not be the most efficient or fairest way to support social and economic goals, but there is a need for public efforts to help achieve many of their aims.
(More here.)
Congressman Paul Ryan, the author of the House Republican budget, is not the first politician to go long on promises and short on details. But his budget, which passed the House last week with no Democratic votes, takes untruth in taxes to a new level.
Mr. Ryan claims that he can drastically cut income tax rates without adding to the deficit, but he hasn’t specified how he would make up the lost revenue, an estimated $4.6 trillion over 10 years. Instead, he has said he would end or reduce unnamed deductions, exemptions and loopholes and defended this dodge by saying that he first wants to build consensus for the concept of pairing lower rates with fewer write-offs. That’s already a mainstay of many tax reform plans.
The problem is that politicians’ most cherished constituencies are big recipients of the most cherished tax breaks — including the exclusion for employer-provided health insurance; deductions for mortgage interest, state and local taxes and charitable donations; tax deferral for retirement savings; and special low taxes on investment income. With some 70 percent of an annual $1.1 trillion in tax breaks flowing to the top 20 percent of taxpayers, and 20 percent going to the middle rung, politicians are loath to champion the end of specific tax breaks.
Another problem is that ending tax breaks would not end the need for government to help with many of the activities subsidized by the tax code, like employee health insurance and retirement savings. Tax subsidies may not be the most efficient or fairest way to support social and economic goals, but there is a need for public efforts to help achieve many of their aims.
(More here.)
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