Taxes and the House Republican Budget

by Ramesh Ponnuru

Jonathan Chait argued that the House Republican budget drawn up by Rep. Paul Ryan “cut[s] Medicare in order to cut taxes for the rich.” In an article for NR, I said Chait’s claim was misleading for two reasons. First, whether the plan cuts taxes overall depends on what baseline you choose. The Ryan plan assumes the enactment of a tax reform that is revenue neutral compared to the tax code as it exists following Bush’s tax cuts. Second, the distributional impact of that tax reform is indeterminate. It will definitely cut tax bills for the super-rich, but it might increase it for the richer half of taxpayers. It depends on what form the tax reform takes.

Chait has responded with four points. “First, the argument simply reflects a legitimate difference in baselines.” Which is what I said.

Second, Ryan’s plan offers a specific rate cut that benefits rich people but does not specify what tax breaks he would take away from rich people. That’s a fair criticism of the plan. But it doesn’t make the claim that it would represent a tax cut for the rich true.

Third, a different Ryan proposal included large tax cuts for the rich. Fine, but irrelevant to the point at hand–which is how to properly characterize the budget that almost all House Republicans just voted for.

Fourth, the budget repeals some tax increases on the rich that were part of Obamacare. Since those taxes haven’t yet taken effect, though, this is just the which-baseline question again. And, again, even counting these as tax cuts, rather than averted tax increases, the plan could still, when the tax reform is specified, leave, say, the top 20 percent of the income distribution paying a larger tax bill.

Bottom line: Republicans can with a clear conscience deny that their budget cuts Medicare to cut taxes for the rich. They can maintain instead that their budget reins in Medicare and other spending programs in order to reduce the deficit and prevent tax increases, and that the plan leaves open the question of how the tax burden is divvied up.

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