Paul Ryan releases new GOP budget plan: What's in it?

Both budgets includes the broad repeal of President Obama’s signature healthcare reform law and a proposal to give states more control over funds for Medicaid, the federal healthcare program for poor Americans. 

Tax rates

Ryan’s new plan will create two income tax brackets of 10 percent and 25 percent but does not specify which income levels will fit into each bracket. Currently, the US has six brackets from 10 percent to 35 percent.

While promising to eliminate tax breaks, Ryan did not specify which tax incentives would get the ax under his plan.

Last year, Ryan proposed a system that would let Americans either file under the current system or a proposal similar to his offer this year. 

The budget would drop the corporate tax rate to 25 percent from 35 percent and sharply curtail taxes on profits made by US companies overseas. Last year, Ryan argued for dropping the corporate income tax entirely and replacing it with a “business consumption tax” of 8.5 percent. It would apply to US imports but not to US exports. 

In a departure from his last offering, Ryan’s FY 2013 budget does not explicitly propose the elimination of taxes on capital gains, interest, and dividends alongside ending the estate tax. 

Both budgets aim to repeal the Alternative Minimum Tax. The AMT was designed to prevent wealthy Americans from dropping their taxes too far via deductions and credits. Aside from Congress’ annual rite of patching the measure, however, the AMT increasingly snares millions of upper middle income Americans. 

Overall spending

In a nod to the more aggressive budget-cutting agenda of many conservative members of the House caucus, Ryan’s budget lays out $1.028 trillion in discretionary spending in the coming fiscal year. Democrats see this as a betrayal of last summer’s debt ceiling deal, which established a $1.047 trillion spending cap for the coming year. In a letter to House leaders on Monday, senior Senate Democrats called the proposal a “breach of faith that will make it more difficult to negotiate future agreements."

Sequester

Ryan also attempts to head off mandatory defense spending cuts required by the summer debt deal. In addition to $900 billion in budget cuts agreed to in order to raise the debt ceiling, Congress adopted a trigger system to ensure an additional $1.2 trillion in spending cuts over the next decade. If Congress fails to identify these reductions by Dec. 31, the cuts are to happen on autopilot, split between defense and non-defense discretionary spending.

Because congressional negotiators couldn’t agree on the second package, the automatic spending trigger, or sequester, is set to hit in January of 2013. Ryan aims to offset the mandated $55 billion in defense reductions by requiring six House committees to come up with savings. The committees themselves will have to determine exactly how to offer these cuts, but Ryan’s budget suggests greater pension contributions from federal workers and reforming medical liability laws as potential options.

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