Yesterday, Speaker of the House John Boehner blamed Republican losses in the last election on bad candidates rather than bad ideas. That’s a comforting thought, especially if you’re in the business of electing Republicans: just swap out the candidates and you're good to go. Bad ideas, on the other hand, are more stubborn creatures. And sadly for today’s GOP, they have more than a few of them.
Take Paul Ryan’s budget plan, for instance.
To be sure, there are things to like about Ryan’s budget, especially if we approach it as a statement of principle rather than governance. Ryan has given us a fine vehicle for continuing the debate over government and its role in American society. That alone is a valuable contribution.
The House budget also makes some useful observations about tax reform. On the subject of the corporate tax, for instance, Ryan makes a good point that many liberals try to avoid:
- While the vast majority of our foreign competitors have moved aggressively to lower corporate tax rates and update their international-tax systems, the United States imposes the highest combined federal-state corporate tax rate in the industrialized world and relies on an outdated international-tax regime designed more than 50 years ago, when the United States faced virtually no global competition.
As is always true when talking about corporate tax reform, there’s a lot left unsaid in this statement, including some facts (like relatively low effective corporate tax rates) that argue against any rush to a particular reform. But the corporate tax is pretty badly broken; no one would consciously design a system coupling high statutory rates with a flawed (and manipulable) tax base. That's the worst of both worlds. So Ryan's complaints are a useful prod to action.
Similarly, Ryan offers some useful thoughts about the individual tax, especially when he emphasizes the burdens of complexity. But Ryan runs into serious problems when he starts suggesting ways to make the tax code simpler. In particular, his emphasis on rate reduction and bracket consolidation is misconceived.
To begin with, “flatter” doesn't mean “simpler.” Even people filling out their tax returns by hand can use the tax tables in the back of the book to avoid all the complicated math.
But the real problem is distributional. Radically flattening and lowering individual tax rates would give rich taxpayers a nice fat windfall. But for most of us, it wouldn't do much. And for a few, the Ryan cuts would deliver precisely nothing.
According to estimates released today by the Tax Policy Center, the Ryan tax reforms would provide an average tax cut of $3,000 to American households. How awesome is that?
Well, not so awesome, at least if you’re living the life of an average household. Americans making more than $3.3 million a year would see a tax cut of $1.2 million. As Howard Gleckman points out on TaxVox, that represents a 20 percent increase in their after-tax income.
But for people in the middle of the income spectrum, the extra cash would come to just $900. For those in the bottom quintile, it would be just $40. And for a third of the taxpayers in the bottom group, the Ryan reforms would provide no relief at all.
In his introduction to the budget document, Ryan observes that "most Americans think we’re on the wrong track." But is this the right one? When Republicans go looking for an explanation of their political problems, they might start by taking a hard look at those famous ideas of theirs.