Tuesday, July 05, 2011

So Congressman, how do you get to 19 percent?

From Mark Thoma's blog, I pick up the following quote from Paul Ryan:

RYAN: What happens if you do what he’s saying, is then you can’t lower tax rates. So it does affect marginal tax rates. In order to lower marginal tax rates, you have to take away those loopholes so you can lower those tax rates. If you want to do what we call being revenue neutral … If you take a deal like that, you’re necessarily requiring tax rates to be higher for everybody. You need lower tax rates by going after tax loopholes. If you take away the tax loopholes without lowering tax rates, then you deny Congress the ability to lower everybody’s tax rates and you keep people’s tax rates high.
The Congression Budget Office did an analysis of the Ryan Budget plan, which anticipates revenues rising to 18.5 percent of GDP by 2022 and to 19 percent by 2030.  Revenue is currently at 15 percent (Table 1 on page 3).   The CBO followed the following instruction:

The path for revenues as a percentage of GDP was specified by Chairman Ryan’s staff.
The path rises steadily from about 15 percent of GDP in 2010 to 19 percent in 2028
and remains at that level thereafter. There were no specifications of particular revenue
provisions that would generate that path. (see page 11).
If Ryan will only accept closing loopholes in order to cut marginal tax rates, partcularly for the wealthiest Americans, I am hard pressed to see how we get from 15 to 19--would you care to specify Congressman Ryan?
I was on a panel last month with Ryan, and was impressed with how intelligent he is, particularly in contrast to Wisconsin's governor.  The fact that he is so intelligent tells me that he knows what a cynical game he is playing.

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