January 26th, 2011
By Ryan Witt, Political Buzz Examiner
Last night Representative Paul Ryan (R-WI) delivered the Republican response to President Obama's State of the Union speech. Ryan's speech followed the script most expected. He criticized the President for what he called the "fail stimulus" and a growing deficit over the past two years. Ryan argued the country must make tough cuts in order to once more balance the budget and that Republicans would lead the way in this process. What was missing from the entire speech, which can be read here, was any reference to Ryan's own plan to solve the budget deficit. A closer look at Ryan's plan may explain why he conveniently left out any reference to his own plan.
Ryan's plan is called the "Roadmap for America's Future." To his credit, Ryan does manage to balance the budget in the future with his plan. What is very controversial, and likely the reason Ryan has so few co-sponsors for his bill, is how Ryan goes about balancing the budget. Ryan makes very deep cuts to Social Security and Medicare. The Social Security age would be raised under Ryan's plan, forcing people to either work longer or find some other way to pay the bills later in life. Ryan would completely do away with Medicare and replace with a voucher seniors would use to purchase private insurance. If an 80-year-old man's voucher was not sufficient to pay for a policy he would either have to make up the difference or simply go without insurance.
Ryan also proposes to greatly change the tax code as the Citizens for Tax Justice explain in a recent report. Ryan would permanently extend the Bush tax cuts for the rich, but do away with tax cuts that help the poor and middle class, such as the Earned Income Credit and refundable child tax credit. Ryan would also allow for an "alternative tax" under which individuals would pay 10% on the first $100,000 they earn, and 25% for all income earned above $100,000. Ryan's plan would effectively lower taxes on the rich from their current rate of 35% to a new low of 25%.
Ryan's tax plan really hits the poor and middle class in two ways. First, to make up for lost revenue caused by tax cuts to the rich Ryan would implement a "Value Added Tax" or VAT. Ryan would repeal the corporate income tax and replace with a 8.5% tax on business consumption. So when Wal-Mart purchases toilet paper to sell to the public that purchase would be taxed to Wal-Mart at 8.5%. Wal-Mart would then pass that cost on to consumers through higher prices. A VAT effectively works as an indirect sales tax. Finally, Ryan would do away with the current tax exclusion for health care benefits. In the future if an employer gave employees health insurance that insurance would be taxabe as "income" under Ryan's plan. Ryan would attempt to make up the difference by giving individuals a $2,300 voucher to purchase insurance, but with many individuals they would still end up paying more.
The effect of Ryan's plan on income groups are dramatic as illustrated below:
— The top 10% of income earners would pay less while the other 90% of Americans would pay more in taxes.
— The top 1% would pay 15% less in taxes, an average of $211,314 less.
— The bottom 80% of taxpayers would end up paying $1,700 more on average.
— The bottom 20% (the poorest Americans with the least money to spare) would end up paying 12.3% more under Ryan's plan.
With facts like these, it is easy to see why Ryan avoided the specifics of his plan to to balance the budget.