If Paul Ryan gets his way, taxpayers earning over $1million per year could get a tax cut of over $200,000 per year, according to CNNMoney on March 15th.
Ryan released his budget proposal on Tuesday, and it contains a provision for collapsing the current 7 marginal rate income tax brackets, which range from 10% to a max of 39.6%, into only two brackets, 10% and 25%. Ryan’s plan is short on details, and leaves the decisions about the income divisions for these brackets to the House Ways and Means committee.
Ryan’s tax reform proposal also eliminates the Alternative Minimum Tax and the Obamacare tax on high-income taxpayers.
His plan is light on how he would compensate for these tax cuts. Presumably spending cuts would be necessary to balance the scales, but Ryan doesn’t provide any information as to how that would be accomplished.
What is certain is the degree of tax liability reduction that very-high-income taxpayers would enjoy. The left-leaning organization Citizens for Tax Justice examined Ryan’s proposal, and determined that millionaire taxpayers, who earn on average $3.2 million per year, would receive a cut of $203,670 in their tax obligation if their marginal tax rate were reduced from 39.6% to 25%. And that’s on the low end, if all tax breaks (loopholes) were eliminated for the wealthy.
Should current loopholes continue, the break for these millionaires could be as high as $345,640 in reduced taxes due.
Ryan argues that he wants to benefit everyone through tax reform. A Ryan spokesperson says, "House Republicans want to clear out special-interest loopholes and lower everybody's rates.”
But if the rich pay less, and the plan does not cost any additional revenue, then clearly the difference must be made up in spending cuts.
Steve Wamhoff, Citizens for Tax Justice's legislative director, suggests that the effects would be felt by the lower and middle income classes. "If the rich pay less, then someone has to pay more for this whole thing to balance out.”
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