Wednesday, March 10, 2010

Ryan's roadmap doesn't raise enough revenue

When Paul Ryan sent his Roadmap proposal to CBO they didn't score the tax revenue side, but assumed that receipts would be equal to 19% of the GDP. The Tax Policy Center, a joint initiative of Brookings and Urban have estimated that his tax reform would raise 16.8% of his plan won't balance the budget. His plan is useful, because it does say 'if the tax system brought in 19% of the DGP, here is what cuts would be necessary to balance the budget and pay down the debt.' It is just that his proposed tax code ($25,000 personal exemption, 10% on income from 25k to 100k, and 25% on all income above. It would be interesting to see the Joint Committee on Taxation score Ryan's proposal to see how close to what Tax Policy Center found....they score tax side of proposals.

Again, his laying out of the cuts he would make is useful, but we will have to have something on the order of 19-20% of GDP in tax receipts to have a hope of fiscal sanity.

Update: Rep. Ryan responds here...saying that tweaks can be made but that taxes being too low is not the problem. Actually, it is part of the problem given the spending commitments....taxes will have to go up in terms of percent GDP from what they are (I am somewhat agnostic about the mix/type of taxes used to collect the revenue) and cuts will have to be made. Keep in mind our tax receipts given a normal economy should bring in around17% of GDP.....which is roughly equal to what we spend on military (5% GDP), Social Security (5%), Federal health (Medicare, Medicaid, VA 5%), and interest on the debt (2%). Everything else (FBI, homeland security, NIH, federal highways, etc etc is straight to the deficit if tax system brings in 17% of GDP.

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