Sen. Pat Toomey (R-PA) today released a budget proposal, alongside a slew of ultra-conservative senators, including Sens. Jim DeMint (R-SC) and Marco Rubio (R-FL). Toomey’s budget document, unlike the budget proposed House Budget Committee Chairman Paul Ryan (R-WI) and passed by the House Republican caucus, does not touch Medicare or Social Security.
However, Toomey did elect to co-opt Ryan’s tax “reform” plan, which involves lowering marginal rates, consolidating brackets, and supposedly paying for it all by getting rid of loopholes and deductions. (According to the Philadelphia Inquirer, Toomey envisions a top marginal tax rate of 25 percent, though he doesn’t lay out specific rates in his budget.)
In Ryan’s case, as CAP’s Michael Linden pointed out, the catch is that preserving the Bush tax regime, but cutting rates (including the top rate), and having it all come out revenue-neutral necessarily implies a big middle-class tax increase:
For Ryan to cut the top rate by nearly one-third and still keep revenue the same as it would have been under the Bush tax cuts regime, he has to raise taxes somewhere else. And though he pointedly refuses to tell us where those tax hikes will come from, we can make an educated guess.
For one thing, the basic math makes a middle class tax hike unavoidable. The rate cut at the top, of course, benefits only those in the top brackets (the richest 2 percent of Americans), but to pay for it, Ryan says he will “broaden the tax base.” Broadening the tax base means removing some tax expenditures that currently benefit the middle class – the rich too, but they’re getting a huge rate cut.
Toomey’s budget is designed in exactly the same way as Ryan’s, hiding the tax increase under pleasant sounding talk of reform. Toomey actually settles on a revenue-level of 18.5 percent of GDP, below the level of revenue raised the last time the budget was actually balanced. Since he exempts Medicare and Social Security, nearly all of Toomey’s savings comes from draconian cuts to the non-defense discretionary budget and Medicaid, which Toomey turns into a block-grant system.
Adding insult to injury, Toomey — like Speaker John Boehner (R-OH) did last night — endorses changing the corporate tax code to allow corporations to never pay taxes on overseas profits, which, as Citizens for Tax Justice pointed out, gives companies a huge incentive to both move jobs offshore and employ tax havens to hide profits earned in the U.S. Of course, this isn’t all that surprising coming from someone who thinks its “not clear” that tax cuts reduce revenue.