The Republican House is set to pass a massive fiscal 2013 budget, tax and entitlement blueprint today after rejecting a handful of alternatives, including one offered by the chief Democrat on the House Budget Committee.
The GOP plan crafted by House Budget Committee Chairman Paul Ryan of Wisconsin calls for a major overhaul of the federal tax code, deep cuts in domestic spending, and the long term elimination of Medicare and Medicaid as we know it. It is the GOP response to the budget plan unveiled by President Obama earlier this year. And while it has no chance of making it past the Senate or becoming the guiding principles of Congress, Ryan’s plan will get plenty of attention this fall on the campaign trail, as Republicans and Democrats square off over fiscal policies and the deficit.
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The Democratic alternative drafted by Rep. Chris Van Hollen of Maryland is more in line with the Obama administration’s approach. It preserves basic entitlement programs, makes more modest long-term cuts to programs, requires wealthier Americans to bear a greater share of the tax burden, and takes far longer to balance the budget.
Other proposals that were considered but given short shrift were the budgets of the conservative House Republican Study Committee and the Progressive Caucus and an amendment by Reps. Jim Cooper of Tennessee and Steven LaTourette of Ohio that embraces many of the provisions of the Bowles-Simpson presidential debt commission.
The Fiscal Times sifted through the contents of the competing Ryan and Van Hollen plans to assess what they would mean for the federal government and average Americans – and here’s what we found:
The Ryan plan takes a hatchet to the current tax code, while Van Hollen leaves most of the current structure in place, with a few revenue-enhancing tweaks.
Ryan’s plan would permanently extend all the Bush-era tax cuts, repeal tax provisions in the health care reform law, end the Alternative Minimum Tax, lower the top corporate tax rate to 25 percent from 35 percent, and nearly eliminate U.S. taxes on American corporations’ earnings from overseas operations. He would also shrink the individual tax code from six brackets down to two of 10 and 25 percent.
Ryan says his tax proposals would be revenue neutral, meaning the overall cost would be offset by eliminating other costly tax breaks and loopholes. However, he has declined to mention any likely targets, such as the home mortgage interest deduction or the tax break on employer-provided health care — two of the largest tax expenditures. Ryan said it would be up to the tax-writing House Ways and Means Committee to decide. With the details currently available, the Tax Policy Center estimates his plan would drain the Treasury of about $4.6 trillion by 2022.
Van Hollen’s plan, by contrast, extends the Bush-era tax cuts for all families except those earning over $1 million. To raise revenue, Van Hollen would institute what Obama has called “the Buffett Rule,” or an alternative minimum tax of 30 percent levied on anyone earning more than $1 million a year. That change would raise $47 billion in revenue over the next decade, according to the Joint Committee on Taxation.