The ‘People’s Budget’ and high tax rates
The House GOP budget would only use spending cuts to reduce the deficit, but the left's would raise taxes and cut defense spending
Will Donald Trump bring Barack Obama’s birth certificate to the Royal wedding? I have no idea, but now that I’ve made our Web optimization folks happy, here is another question: What’s the deal with the People’s Budget, the fiscal plan released this week by 80 congressional progressives?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
The answer is likely to drive less traffic than either The Donald or The Royals, but it is nonetheless worth exploring. After all, Paul Krugman called it, “the only major budget proposal out there offering a plausible path to balancing the budget.” Depends, I suppose, on what you mean by plausible.
The Congressional Progressive Caucus’ budget is, at 30,000 feet, the mirror image of the House-passed fiscal plan developed by Budget Committee Chair Paul Ryan (R-WI). While the House GOP budget shows what happens when you try to slash the deficit with only spending cuts, the left’s budget shows what happens when you just raise taxes and cut defense spending.
Ryan would remake Medicare, cut projected Medicaid spending by $800 billion and other domestic programs by half over a decade—and he’d still end up with a deficit of $400 billion in 2021. The progressives create impossibly high tax rates, and while they claim to balance the budget in 2021 (it is very hard to confirm their numbers), they almost certainly won’t after that.
While Ryan would cap taxes at about 19 percent of Gross Domestic Product, the liberals say their plan would generate revenues of 22 or 23 percent—roughly matching spending.
Mimicking President Obama, their plan would retain the Bush-era tax rates and some tax credits for those making less than $200,000 ($250,000 for joint filers). In addition, it would protect middle-income families from the Alternative Minimum Tax for another decade.
Beyond that, the tax increases in this plan are breathtaking. It would restore pre-2001 income tax rates for those making between $200,000 and $1 million and create five new brackets for higher earners, topping out at 49 percent for those making $1 billion or more. Capital gains and dividends would be taxed at ordinary income rates for those making $1 million or more (up to 49 percent). It would also cap the value of itemized deductions for high-income taxpayers at 28 percent (another Obama idea), raise Social Security payroll taxes for both workers and employers, and raise the gas tax by 25 percent. There’s more, but you get the drift.