Tax Policy Center: Ryan tax-cut plan benefits wealthiest

2013-03-17T00:00:00Z Tax Policy Center: Ryan tax-cut plan benefits wealthiestThe Washington Post The Washington Post Arizona Daily Star
March 17, 2013 12:00 am  • 

WASHINGTON - The tax plan embedded in the House Republican budget would cut taxes by $5.7 trillion over the next decade, with the benefits flowing disproportionately to very wealthy households, according to a new analysis by the nonpartisan Tax Policy Center.

Taxpayers earning more than $1 million a year would benefit the most from the GOP tax plan, the analysis shows, reaping an average $400,000 tax break that would send their after-tax income soaring by nearly 20 percent.

Meanwhile, taxpayers earning between $40,000 and $50,000 a year - closer to the national average - would see their taxes cut by about $666 on average, increasing their after-tax income by less than 2 percent.

The analysis by the Tax Policy Center, a project of the Brookings Institution and the Urban Institute, focuses solely on one part of the tax plan spelled out in the GOP budget: a proposal to collapse the rate structure, which tops out at 39.6 percent, into two brackets, 25 percent and 10 percent.

The budget, drafted by House Budget Committee chairman Paul Ryan, R-Wis., proposes to make up the revenue lost to those changes through an overhaul of the tax code that would eliminate existing tax breaks and deductions.

But the budget leaves those details to the House Ways and Means Committee, and the Tax Policy Center did not attempt to predict the effect of those changes.

Urban Institute resident fellow Howard Gleckman questions whether it is possible to replace all that cash. "Could Ways & Means find $5.7 trillion in tax preferences? It is hard to imagine," he said, noting that such a large sum would require a 30 percent reduction in existing tax breaks.

Aides to Ryan and Ways and Means Chairman Dave Camp, R-Mich., did not immediately respond to the analysis. But GOP tax aides have pointed out that tax reform could raise revenue through other means than wiping out tax deductions.

In the 1986 tax overhaul, for example, a study by Ernst and Young found that 40 percent of the revenue raised to cover the cost of rate cuts came from new policies, such as limiting passive losses.

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