House budget plan leaves some big questions
The budget proposal from the House Budget Committee is a mix of general targets and very specific policy proposals
If you view a budget as a vision of government, the House GOP’s fiscal map unveiled today charts a profound course correction for Washington and its relationships with both its citizens and the states. In this new world, individuals and families would receive only limited assistance from government in times of stress, but they also might pay much less in taxes than under the status quo.Skip to next paragraph
Howard Gleckman is a resident fellow at The Urban-Brookings Tax Policy Center, the author of Caring for Our Parents, and former senior correspondent in the Washington bureau of Business Week. (http://taxvox.taxpolicycenter.org)
Subscribe Today to the Monitor
According to the fiscal plan drafted by House Budget Committee Chair Paul Ryan (R-WI), federal spending would be almost $1 trillion less in 2021 than if fiscal policy stays on its current track. That is a staggering 20 percent cut, even before the House Republicans biggest proposed change—the repeal of Medicare as we know it—would begin to kick in.
At the same time, tax revenues would be cut by about $600 billion from the Congressional Budget Office baseline for 2021. And the deficit that year would be about $400 billion, roughly $350 billion lower than if government spending remained on course.
This is a big deal. But the budget document is a curious mix of the general targets normally set by a budget resolution and very specific policy proposals. As such, the House GOP leaves unanswered some very important questions. As you think about what Ryan & Co. are doing, here are some to keep in mind:
What exactly is the tax plan? The budget sets only two targets: The federal government should raise no more than 19 percent of Gross Domestic Product in taxes and other revenues. And the top tax rate for both individuals and corporations should be 25 percent. Beyond that, it is a black box. The fiscal plan says nothing about payroll taxes or estate taxes, and almost nothing about taxes on capital gains and dividends. It calls for repealing or scaling back tax preferences, but does not say which ones or by how much. Watch how the House Ways & Means Committee fills in these extremely controversial blanks.
Medicare would be replaced, but with what? The budget plan would dump Medicare for a voucher system where seniors would get an annual subsidy to buy health insurance in the private market. But today, it is not possible for most seniors, who likely have pre-existing conditions, to buy insurance as individuals. For many, premiums would simply be unaffordable even with a government voucher. They could purchase under the 2010 health law that creates insurance exchanges and requires carriers to sell coverage to all comers no matter their health. But the Republicans want to repeal that law and won’t say how they’d replace it.