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April Fool’s Budget Relies on Inconsistent Tax Rates

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"April Fool’s Budget Relies on Inconsistent Tax Rates"

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The April Fool’s Budget released today contains, naturally, generous tax cuts for the wealthy. One such tax break is that they propose to offer Americans a “choice” between the current tax system, or else you could choose to pay a marginal tax rate for income up to $100,000 of 10 percent and 25 percent for any income thereafter.” Since right now the top marginal tax rate is 35 percent, that would be a huge tax cut for wealthy Americans. And of course wealthy Americans would choose the option that’s cheaper for them. This would sharply reduce government revenue and lead to large budget deficits.

But one of the April Fool’s Plan’s conceits is that it’s supposed to produce low deficits. How to accomplish that? Well, Ryan Grim points out that one thing Paul Ryan did to make the math work out is assume people would choose to pay the higher rate:

But the real way that Republicans offer the tax cut without factoring it into the budget’s revenue is to suggest that Americans won’t actually take advantage of the lower rates. Instead, the GOP budget permanently extends President Bush’s 2001 and 2003 tax cuts. A Republican budget committee aid said that the revenues assumed in the GOP budget are based on the current tax structure that resulted from those cuts. [...] Under the current tax code, an individual making more than $160,850 pays a 33 percent rate; under the Republican plan, that taxpayer could choose to pay 25 percent instead. (For a family, the income threshold is $195,850.) For a family earning more than $349,700, the rate rises to 35 percent, but filers could still choose the 25 percent rate.

It would be nice to have a real debate between progressive and conservative ideas about the course of public policy instead of needing to spend all this time hunting around for gimmicks.

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